Tax-loss harvesting is an investment strategy in which assets are sold at a loss, and the losses are used to offset taxable capital gains from other investments.
Tax-loss harvesting is an established method for reducing tax burdens and potentially enhancing investment earnings in traditional investment portfolios. The benefits of tax-loss harvesting can also be realized for digital assets when utilizing an SMA structure. Having an efficient strategy in place for tax optimization is especially important for digital assets, given the relatively high levels of volatility.
The Top Benefits of Tax-loss Harvesting for Digital Assets
+ Turn volatility into an opportunity: As an emerging asset class, bitcoin and digital assets experience high levels of volatility. By utilizing tax-loss harvesting, advisors can reduce the impact of this volatility on their clients' portfolios while maintaining a long-term allocation to digital assets.
+ Automation: With digital asset SMAs, the tax-loss harvesting process is automated, increasing the benefits of tax-loss harvesting without any extra work for the advisor.
+ Reducing taxes: Tax-loss harvesting can reduce the amount owed in capital gains when filing taxes. If there are no gains in the same tax year, carry-forward losses can be used in future years.
+ Growing the portfolio long-term: Reinvested tax savings will compound over the life of the investment, which could be a significant benefit for digital assets over the long term.
Digital assets represent a long-term opportunity in a diversified portfolio. By utilizing digital asset SMAs, advisors can tap into the benefits of tax-loss harvesting with minimal setup and ongoing automation. Clients will benefit by maintaining their long-term allocation to digital assets, limiting the impact of volatility, and potentially reducing their tax burden.