Eaglebook: Give Your Clients The Power To Harvest Tax Losses

(Eaglebrook Advisors) The volatility of bitcoin can be daunting for advisors and their clients. Extensive drawdowns weigh on conviction, but those who own spot bitcoin in a separately managed account (SMA) and believe in the long-term investment thesis can tap into the power of Tax-Loss Harvesting (“TLH”), a silver lining that can save investors thousands on a tax bill.

When investors sell at a profit, they pay capital gains tax. Investors can reduce their capital gains in a tax year by selling some of their assets at a loss, called Tax-Loss Harvesting. Given the volatility of bitcoin, investors have more opportunities to realize and harvest capital losses without losing their position, making TLH a powerful tool for bitcoin investing.

Currently, the IRS states that wash sale rules (waiting 30 days before buying back an asset) only apply to securities. Bitcoin is taxed as property (not a security), meaning investors can sell and buy back when invested through a SMA. This process realizes and harvests capital losses without losing any meaningful position in the investment.

A net capital loss occurs when total capital gain and losses for the year are negative. If the net capital loss is less than or equal to $3,000, then the entire amount is available to offset capital gains or potentially other types of income, like earned income from work. Net losses exceeding $3,000 roll over to subsequent years. Regularly taking advantage of bitcoin price dips can help investors save money and reduce tax burdens at the end of the year.

By utilizing Eaglebrook’s SMA Platform, clients own bitcoin and can use the automated technology that handles tax optimization. It’s as easy as selecting a TLH threshold and letting the power of Eaglebrook take care of the rest. When those clients come to you to sell because of a price drop, showing them how much they have saved on taxes may turn the conversation from negative to positive.


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