New Money

Wealthfront’s New Service Helps the Tech Set Easily Dodge Taxes

Tax-loss harvesting for dummies.
screen shot 2012 10 09 at 3 46 45 pm Wealthfronts New Service Helps the Tech Set Easily Dodge Taxes

These people have monies. (Photo: Wealthfront)

You work hard for that six-figure salary. Heads down and standing desk up, evening coding sessions bleed into all-nighters with the ease of a mouse click. So when it comes time to hand over some of that hard-earned cash to the government for taxes, it’s understandable that you’d be a little ruffled. “Why can’t I find tax loopholes like that guy Mitt Romney?” you might wonder angrily as you zip down the 101 in your company-leased BMW. “Life is just not fair.”

Luckily, a startup called Wealthfront is here to ease all your wealthy person woes. Wealthfront targets fresh-faced tech workers with six-figure bank balances and uses algorithms to help manage their money. Wired reports that the company announced today that it has developed an automated service that can help budget-conscious tech workers legally skimp on their taxes. Hey, didn’t you see a post on Hacker News about hacking the tax code?

The new service allows clients with more than $100,000 in their portfolios to partake in “tax-loss harvesting,” which can save them a bundle of dough. Wired explains:

“Say you own shares in two mutual funds. One goes up, and you sell for a profit, which in tax terms is considered a capital gain. Meanwhile, the other fund goes down. So you sell that too…

…When you sell the tanking mutual fund shares for a loss, you can write that off against the gain you made selling the other shares. At the same time, you can take the remaining proceeds from the shares you sold at a loss, then turn around and reinvest them in a different fund of comparable value. In essence, you’ve sold shares for a loss but still own the shares. You’ve ‘harvested’ your loss, but you haven’t lost your crop.”

If the financial jargon hasn’t caused you to nod off, then congrats–by enrolling with Wealthfront’s tax-harvesting service, the company says you’ll be able to increase after-tax returns by 1 percent/year.

That may sound laughably small to 47 percenters, but when you’re building your golden nest, every little bit counts.

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