I have a Wealthfront account that routinely harvests tax losses. It then presents some subset of that number as ‘potential taxes saved’. It lets me drill down how it gets to that number but I still have some questions.
For me, it currently says: $1600 in harvested losses. Those losses can offset 0 short term and long term gains. Any remaining losses can be used to reduce my taxable income.
My question is about the later part. I think I understand tax loss harvesting when they are used to cancel out capital gains. However, in a situation with no capital gains, how does it offset my income? Does it just get subtracted from my income automatically when I do my taxes (turbo tax), or do I need to do anything to make sure the losses offset income? Thanks!
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