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Tax loss harvesting (called WiseHarvesting by Axos Invest) is the practice of selling a security that has experienced a loss—and then buying a similar one to replace it. The replacement does two things: it allows the investor to “harvest”, or realize, a capital loss on his or her tax return and, also maintain the desired exposure to the asset class. The only way to realize a loss is to sell the depreciated asset. It is a relatively simple concept that is hard to do right when you have many asset classes and even more tax lots in your portfolio.

Axos Invest uses sophisticated software engineering to handle this complexity, scanning portfolios daily for losses (temporary dips that result from volatility), that can be harvested. Traditionally, a service like this was only available to high net worth investors—but Axos Invest now makes it more widely available than it ever has been before. Sophisticated DIY investors are also familiar with this practice, typically harvesting once a year, but daily scanning and quarterly harvesting, which is more effective, is very difficult to implement manually.

Axos Invest’s unique approach to pricing in order to provide a clear value-added service is unique in this industry. The annual fee is 0.25% of taxable assets charged monthly, but capped monthly at $20. This means accounts over $96,000 can potentially enjoy unlimited value over the total fees paid as their account sizes grow. For clients just starting out, there is no minimum to start, ensuring they can take advantage immediately. This approach reverses the traditional model of earning infinite levels of fees based on client account sizes to create one that is fully transparent, beneficial to, and aligned with clients’ interests.

Tax loss harvesting (WiseHarvesting) is beneficial for the majority of investors—when you can write off losses against capital gains, and/or up to $3,000 of ordinary income. Any losses not used to offset gains or ordinary income can be carried forward indefinitely until used up. The earlier you start tax loss harvesting—and the higher your current tax bracket—the more beneficial it can be over time. However, harvesting lowers your cost basis, which can mean more taxes in the future—unless you don’t plan to liquidate your investments. That makes harvesting an especially beneficial strategy if you plan to donate some, or all of your assets to charity, or pass them down to your heirs, who will get a stepped-up basis.

However, there are some specific instances when you should not use tax loss harvesting, or should proceed with caution. Harvesting losses is not appropriate if you are in a low enough tax bracket to realize capital gains tax free. More generally, tax loss harvesting primarily adds value through tax deferral, which is undesirable if your future tax bracket will be higher than your current. If you expect to achieve (or return to) substantially higher income in the future, tax loss harvesting may be exactly the wrong strategy—it may, in fact, make sense to harvest gains, not losses.

Also, married couples who both hold accounts at Axos Invest and those individuals who also hold accounts outside of Axos Invest should think seriously about not using tax loss harvesting, as trading in identical securities across spousal or similar accounts would likely cause wash sales, and trigger a taxable event.

• Total Stock Market
• Emerging Market Stock
• International Developed Stock
• US Corporate Bond
• TIPS Bond
• Short Term Corporate Bond
• Intermediate Term Govt Bond
• Short Term Govt Bond
• REITS

Axos Invest does not charge any fees.
Axos Invest does charge an optional fee to implement tax loss harvesting on your portfolio if you request this service.
ETFs have an expense ratio that range from .05%-.2% depending on your allocation - this is about 15 cents for every $100 you invest), which you would pay no matter where or when you purchased these ETFs.

Rest assured, Axos Invest offers ETFs with some of the lowest fees available.

Axos Invest can open or transfer the following types of accounts:

• Taxable Investment Accounts
• Roth IRA
• SEP IRA
• Traditional IRA

Axos Invest is an SEC registered investment and securities advisor with all securities in customer accounts protected up to $500,000 by the SIPC.

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