Tax Loss Harvesting(TLH)

Intelligent tax optimization (OFI) is a technique that consists of generating or forcing capital losses, when the markets allow it, which will later serve to offset profits and thus avoid the respective taxes on profits. This technique allows us to reduce taxes and is done at no additional cost to our clients.

In an investment portfolio, not all asset classes always move in the same direction. When an asset class (ETF) goes negative we can sell that position and replace it with a similar ETF while maintaining the original portfolio allocation. In this way we force capital losses and generate tax credits that can offset capital gains in the same year or in the subsequent 4 years.

This technique is applied in compliance with the Spanish anti-application law, respecting not purchasing the same asset (ETF) before 60 days have passed. Also keep in mind that in normal rebalancing we may be generating some capital gain and some ETFs generate dividends.

You can learn more about this technique in our post
What is InbestMe Tax Loss Harvesting(TLH)?