Tax Loss Harvesting (TLH)

Tax-loss harvesting lets you sell investments that are down, replace them with something reasonably similar, and then offset realized gains (or up to $3,000 of ordinary income) with those losses. Although TLH may not always be in your client's best interest, it is beneficial for some. You can also read Jeff Landt's thoughts regarding TLH and automation in a recent Navigator article.

The TLH feature is available in any non-qualified account, but only in conjunction with specific strategies. If you want to tax-loss harvest in accounts using other strategies (e.g. any of the DFA options), you can use Gain locks to accomplish that, but it's a manual process.

Automatic TLH

The TLH feature will automatically swap out your primary fund if it meets two criteria:

1️⃣ of 2️⃣ : The fund has sufficient losses (i.e. it's down 5% or more and has at least $200 in losses)

2️⃣ of 2️⃣ : There is a replacement fund available for that fund (note: not every primary fund in a strategy necessarily has a replacement fund).

Example of TLH

In the account below there are three funds (VMLUX, VIGAX, and VSIAX) with unrealized losses, but only one of them (VIGAX) meets both requirements for tax-loss harvesting:

❌ VMLUX = TLH will not happen.
- ✅ Greater than 5% (and $200) in unrealized loss.
- ❌ VMLUX does not have a replacement fund.
✅ VIGAX = TLH will happen.
- ✅ Greater than 5% (and $200) in unrealized loss.
- ✅ There is a replacement fund for VIGAX (SPYG).
❌ VSIAX = TLH will not happen.
- ❌ Less than 5% unrealized loss.
- ✅ There is a replacement fund for VSIAX (IWN).

Using Gain locks to manually TLH

Although the TLH feature is only available with certain investment strategies, you can get around this by using the gain lock feature to manually harvest losses. In the example below, the account is using the DFA Sustainable NQ strategy, which does not contain replacement funds and therefore does not support automatic TLH, even though it has over $26k in unrealized losses (and $43k in unrealized gains).

If you want to TLH in this scenario, it would require you to place manual trades using the gain lock feature.

***Skip to the 2:34 mark of this video to see an example of how to do this***

In the screenshot above, you could switch to another strategy (e.g. ESG or Passive NQ), use gain locks to hold funds with an unrealized gain (so you don't realize the $43k in gains), let Symplany One sell everything that has an unrealized loss, and then manually switch back to the DFA Sustainable NQ strategy after a month.

As long as the gain lock feature is on, you will be able to keep any position with a gain (even if it's not on your target strategy).
If you attempt to buy a holding you sold for a loss in the last 30 days, Symplany One will block the trade until the 30 day restriction expires.

Investment strategies that currently support automatic TLH:

Active
Core & Satellite Modeling
ETF Muni Active Fixed Income
ETF Taxable Active Fix Income
Passive Core NQ
Vanguard Index Muni
Vanguard Index Taxable

Investment strategies that do NOT support automatic TLH:

Core American
DFA
DFA Social Christian Muni
DFA Social Christian Taxable
DFA Sustainable Muni
DFA Sustainable Taxable
DFA Tax Aware
ESG

Common questions:

Q: How long does Symplany hold onto the replacement fund after it has been purchased?

A: Once the primary fund is buyable (i.e. after the wash-sale window is over), Symplany will sell the replacement fund if it is at a loss (see note below). All new funds that get added to the account after the wash-sale window will buy into the primary fund. But the replacement will only get sold if it is at a loss.

Note: if Symplany calculates trades after 30 days to sell a replacement fund at a slight loss, it's possible that by the time trades hit the market the replacement fund is actually at a gain (due to intra-day market movement). In this (uncommon) scenario, it's highly probable the client still has a net loss (since the primary fund was originally sold at a 5% loss, or more).

Q: Does Symplany harvest losses for individual tax lots?

A: No. Our tax-loss harvesting is based on the ticker, not the tax lot. The entire holding must be down 5% (and at least $200) to harvest losses.

Q: How can I tell if any funds in my account do not have a replacement fund?

A: One option is to click the "question mark" icon next to the Tax loss harvesting feature to pull up a list of all replacement funds for that strategy.

Additionally, when TLH is turned on, you can hover over the ticker symbol to see if a replacement fund exists for any particular holding.