Tax-Loss Harvesting Annual Savings Calculator
Vanguard estimates systematic tax-loss harvesting adds 0.5-1.5% annually (tax alpha) to after-tax returns. On a $5M portfolio at 37% tax rate, that is $92,500-277,500/year in tax savings.
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Frequently Asked Questions
How much can tax-loss harvesting save annually?
Tax-loss harvesting savings calculation: Annual tax alpha: 0.5-1.5% of portfolio per year (Vanguard, Parametric research); At 37% marginal rate + 3.8% NIIT = 40.8% effective rate on short-term; At 23.8% effective on long-term gains; Example $5M portfolio: Conservative TLH (0.5%): $25,000 in losses harvested → $10,200 saved (at 40.8%); Aggressive TLH (1.5%): $75,000 in losses → $30,600 saved; Over 10 years (with compounding): $10,200/year reinvested at 8% = $148,000 additional wealth; Direct indexing advantage: instead of buying S&P 500 ETF, own 500+ individual stocks; harvest losses in individual positions while index goes up; requires $250,000+ to implement meaningfully; $1M+ for maximum benefit; Platforms: Parametric (Morgan Stanley): $250K minimum; Aperio (Goldman Sachs): $1M minimum; Wealthfront (retail): $100K minimum for TLH+; Betterment (retail): automatic TLH at all levels.
What is direct indexing and is it worth it?
Direct indexing explained: What it is: owning the individual stocks of an index (S&P 500, Russell 1000) rather than an ETF; enables stock-level tax-loss harvesting; customization: exclude specific sectors (tobacco, firearms) or companies; factor tilts (value, momentum) without paying active management fees; When it makes sense: $500K+ in taxable accounts (sub-scale otherwise); high tax rate (37% federal + state); concentrated position to hedge against (e.g., tech executive with $2M NVDA); charitable giving: donate appreciated shares, buy back with fresh cost basis; Costs: 0.20-0.40% management fee (more than ETF, less than active); transition cost if moving from existing portfolio: potential gains realization; Popular providers: Parametric (Morgan Stanley), Aperio (Goldman Sachs), Canvas (First Eagle); fintech: Wealthfront, Betterment, Frec (newest, lowest minimums at $20K); Tax alpha estimate: direct indexing adds 0.5-1.5%/year; after management fee premium of 0.15%: net 0.35-1.35% alpha.
When should I work with a family office vs. private bank?
Family offices (single or multi) make sense at $50M+ in investable assets. Below that, private banking (JP Morgan Private Bank, Goldman Sachs PWM, UBS) offers similar services with lower minimums ($5-25M). Family offices provide consolidated reporting, direct deal access, and custom investment mandates unavailable at private banks. Multi-family offices (Bessemer Trust, Glenmede) offer a middle ground at $10M+ with family-office-level service at lower cost.
How much should ultra-high-net-worth individuals keep in cash?
Most wealth advisors recommend 3-5% of liquid net worth in cash/cash equivalents for UHNW individuals — enough to cover 12-24 months of lifestyle expenses plus opportunistic investments. Excess cash above this benchmark costs 5-8% annually in opportunity cost vs. diversified portfolios. Treasury bills, money market funds, and short-duration bonds provide liquidity with yield while maintaining capital preservation objectives.
Tax-Loss Harvesting Annual Savings Calculator — 2026 Guide
Vanguard estimates systematic tax-loss harvesting adds 0.5-1.5% annually (tax alpha) to after-tax returns. On a $5M portfolio at 37% tax rate, that is $92,500-277,500/year in tax savings. Sophisticated wealth planning requires understanding the interplay of investment returns, tax efficiency, legal structure, and generational transfer. High-net-worth individuals who work with dedicated wealth advisors typically outperform self-managed portfolios by 1-3% annually after fees — a significant difference at scale.