In our October commentary, which can be found here, our wealth management team highlighted the House Ways & Means Committee proposal, which contained the potential tax hikes. While all the increases are speculative, we can be reasonably sure that the large stimulus packages will result in some tax changes.
Janiczek Wealth Management is here to help our clients navigate the ever-changing tax landscape. Taxes are the most expensive cost that our clients face. Whether or not some of these proposals become law, interest, dividends, and capital gains are predictable and generated year after year. Janiczek Wealth Management implements tax-loss harvesting as an additional strategy in our planning toolbox.
The tax-loss harvesting (TLH) strategy aims to benefit taxable investors with realized gains by roughly tracking passive benchmark indexes while realizing losses on individual stocks. These capital losses can assist investors in saving money by offsetting profits that might otherwise result in a tax bill. Tax alpha is a measure used to assess the efficacy of such active tax management strategies.
Tax alpha is defined as the difference in return between a portfolio and its passive benchmark after taxes are deducted. Our tax-smart trading capabilities in our Separately Managed Accounts (SMA) solution enable our clients to gain tax alpha from two sources. The first is the immediate benefit of avoiding having to pay taxes when the loss is realized. Second, there is the deferred benefit of reinvesting funds from the resulting tax loss.
Furthermore, our SMA solution can combine a TLH strategy with factor and value strategies. Our clients may align their beliefs with a portfolio that fits their value set.
We won’t know the specifics of the legislation until later this year, but interest, dividends, and capital gains will all be taxed. Talk to us about how a tax-loss harvesting strategy might help you lower your current tax bill while preparing your portfolio for future tax hikes.
If you are interested in learning more about our wealth, investment, and tax planning services, please contact Cathy Wegner, Director of New Client Engagements, at 303-339-4480 or cwegner@janiczek.com.
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