Tax loss harvesting is a strategy aimed at reducing your tax liability by selling securities at a loss to offset capital gains from other investments. This strategy has the following benefits:

• Tax efficiency: By offsetting capital gains, which result from the sale of securities at a profit, with the sale of securities held at a loss, your net taxable gains can be reduced, providing potential tax savings, while maintaining your general investment strategy.
• Improved after-tax returns: Reducing the tax burden may enhance the overall returns for your investment portfolio, making it valuable for long-term investors subject to taxes.

Robinhood Strategies has taken a differentiated approach, aiming to mirror the customized service often offered by high net worth advisors.

• Annual cadence, aware of the full year: Many services continuously tax loss harvest, which can lead to suboptimal outcomes as they aren’t aware of the full year's gains/losses across accounts. We will only harvest once per year, at the end of the year, to give customers what we believe to be the best possible experience. Because we actively manage portfolios, we will consider natural opportunities to harvest losses in the event of a larger market downturn.
• Investor’s choice: If you have eligible losses, we’ll guide you through a transparent breakdown of the possible loss harvesting strategies, with choices on how to proceed. This allows you to choose from a series of potential outcomes, giving you a chance to consider gains or losses outside of Robinhood that might inform your decision. Even if you don’t select a harvesting strategy, we will automatically harvest losses against gains in your managed account, if available. Disabling the feature altogether is also available.
• Holistic assessment: You can choose to include your investment accounts across Robinhood in the search for gains that might be offset by harvesting losses in your taxable managed accounts. This approach allows for a more comprehensive view into potential tax benefits.

Tax loss harvesting will automatically be enabled for taxable managed accounts of US persons (as defined by the IRS) that meet all of these requirements:

• Have an active, funded taxable managed account for more than 30 days, to help limit the possibility of wash sales.
• Your stated income is above the threshold subject to capital gains tax.
• Your account value is $3,000 or greater at harvest time.
• Have 1 or more positions with a minimum amount of unrealized losses that are not subject to a wash sale based on recent trades.

If you are or become eligible during the year-end tax loss harvesting period, our team will email you about tax loss harvesting being automatically enabled on your account and about the opportunities to optimize your tax savings. You can disable it anytime before the tax loss harvesting is scheduled to occur. Disabling would prevent any sales related to tax loss harvesting from occurring in your managed account.

• Dashboard and reporting: You can view the status and timing of tax loss harvesting activities in your managed account dashboard. You can also get stats on performance for the current year to help stay informed about the realized and unrealized gains and losses in your investment accounts.
• Automated process: Toward the end of each year, when we have a more complete view of your gains and losses, we’ll identify and execute tax loss harvesting trades in your managed account without requiring any action on your part, if eligible. By default, we'll aim to harvest just enough to offset gains in your managed account. After we harvest losses, we’ll reinvest your money in ETFs for 31 days to maintain your current overall investment portfolio allocation and avoid wash sales.
• Strategy selection: If eligible, and enrolled in this feature, you may also be able to choose an alternative tax loss strategy based on your tax situation and goals. We'll send you an email letting you know when it's time to review your options. You can choose to disable the feature anytime before losses are harvested.
• Form 1099: We’ll send you a Form 1099 during the tax season with all the necessary details to claim losses for the applicable tax year.

Here’s an example of what you can expect:

If eligible, we’ll automatically harvest losses against gains in your taxable managed account for you, so no further action is required on your part. However, you may be able to choose an expanded strategy:

1. In your managed account dashboard, scroll down and select Tax loss harvesting
2. Select Review losses
3. Choose accounts you’d also like reviewed for gains that are in addition to this account, like your self-directed individual or joint accounts
4. Review your gains
5. Then choose your tax loss strategy by reviewing and choosing the preferred strategy to take within your managed account. Depending on the amount of gains and estimated losses you have that could be harvested, options to choose from may include some or all of these:

• Only offset managed gains: Sell enough holdings to offset gains within your managed account.
• Offset gains across accounts: Sell enough holdings to offset gains across your selected eligible Robinhood brokerage accounts.
• Harvest the max losses possible: Sell as many holdings as possible to maximize the amount of losses and your potential tax savings.
• Don’t harvest any losses: We’ll continue to manage your portfolio as usual without tax loss harvesting activity.

6. Review trade estimates and confirm. Trades are then scheduled.

If you are eligible and decide to choose an expanded strategy, we’ll harvest losses based on your selection in your managed account for you within the next business day. If instead, losses are harvested automatically, we’ll post the last date you can change your mind and update your selection for the upcoming tax year.

For the 31-day period after tax loss harvesting, the investment team will reinvest the proceeds of the loss harvesting sales into broad based stock and bond ETFs, depending on your portfolio. This is to help avoid wash sales. After the 31 day period is complete, the team will invest back into the full recommended portfolio.

If you are eligible for tax loss harvesting, you can choose to disable it altogether:

1. In your managed account dashboard, scroll down and select Tax loss harvesting
2. In Status, select Disable

Note that you can enable it again by selecting Enable tax loss harvesting (near the bottom)

If losses are harvested, we’ll let you know how much after the trades are complete. It’s important to know about the following to plan for tax season:

• If you trade in other accounts, or request a withdrawal of funds from your managed account, which will create trades: Trading securities sold at a loss, including trades resulting from a withdrawal request from your managed account, may affect how many losses you can claim. IRS rules disallow the deduction of a loss if the same or a substantially identical security is purchased within 30 days before or after the sale, including in a different account. This rule prohibits investors from claiming tax benefits without actually changing their investment positions. You can find the list of securities we traded at a loss for you in Tax loss harvesting → Status → View trades.
• We review purchases you made, including stocks, ETFs, and options (long call, short put) across all your accounts to assess what securities are eligible to be sold at a loss that can be claimed.
• Limit trading while waiting 30 days: To limit the possibility of a wash sale that disallows taking a loss to offset gains, we will limit trading and investing in your managed accounts, in the 30 days following tax loss harvesting, including your managed IRA (if applicable).
• Long-term strategy: While tax loss harvesting can provide immediate tax benefits, it needs to be considered as part of a long-term investment strategy. It’s important to avoid making decisions made solely based on tax implications and to prioritize your overall investment goals instead. Be sure to discuss your tax planning with your personal tax advisor.

For additional information and an example, review Wash sales.

• We currently do not include gains or losses resulting from futures or event contracts trades—in the tax loss harvesting dashboard as well as in the potential tax loss strategies.
• Note, gains and losses from crypto trades may be incomplete because there are no regulations requiring cost basis updates in a transfer.
• If you recently opted in to have your investment accounts receive mark-to-market treatment, you should disable tax loss harvesting for your managed account.

Tax loss harvesting is only available for accounts that meet all eligibility requirements. Robinhood Strategies does not represent that the potential tax consequences described as part of its tax loss harvesting service will be achieved. The effectiveness of tax loss harvesting in reducing your overall tax liability depends on your complete tax and investment profile, including holdings and transactions in accounts outside of Robinhood, account ownership (e.g., joint or spousal accounts), the nature of investments (taxable versus tax-advantaged), and holding periods (short-term versus long-term). The ability to utilize harvested losses depends on the recognition of capital gains in the same or future tax periods and may be limited by tax law.

Robinhood Strategies does not provide tax advice and assumes no responsibility for any tax consequences arising from transactions in your account, including capital gains, wash sales, or other tax results, that may occur in connection with tax loss harvesting activity. You should carefully read all disclosures about the tax loss harvesting service. For questions about your specific tax situation, consult with a tax professional.

Find important information about your account in the Roth IRA customer agreements or the traditional IRA customer agreements as well as the Robinhood Asset Management Account Agreement and the Robinhood Asset Management Brochure and Brochure Supplement.