Topic · Tax in investing
Eight tax levers, ranked: the four worth the most are free, the one sold hardest is worth the least
Never selling keeps 35¢ of every dollar of gain and the one-year line keeps 17¢; both are statute, and both cost nothing but patience. Loss harvesting, the one that gets sold, is worth 0 to 30 basis points a year after year five.
- 35¢per $ of gain Never realize the gain Hold until the basis steps up at death, or give the shares away. The whole tax disappears.
- 17¢per $ of gain Cross the one-year line Long-term instead of short-term. Free, apart from patience; known by everyone and still crossed early.
- ≈ 120 bpsa year Hold an ETF instead of a mutual fund Average tax drag 0.7% against 1.9% a year over ten years. Costs nothing extra.
- 52% vs 35%on what it throws off Put each return type in the right account High-turnover return belongs where turnover is not taxed. Free.
- 155 → 0 to 30 bpsa year, year one to year five Harvest losses Big in year one, small after year five unless new cash or recurring gains keep it alive. Fees run from 9 to 115 bps a year.
- Defers the whole gain Move an appreciated portfolio without selling Section 351 seeding into an ETF, or an exchange fund for one big stock. Niche, and only for low-basis positions.
- More losses, same limit Tax-aware long/short Multiplies the harvest three to ten times, but the losses still need somewhere to go. Not a general strategy below about $5 million.
- Changes the label, defers nothing Option overlays Covered calls and income ETFs convert the kind of income you receive. They do not reduce it.
Start here2 reads · 9 min
The few ideas everything else rests on.-
What a dollar of gain keeps after tax
Sell a winner at the top California bracket and 35 cents of every dollar of gain goes to tax. Sell it inside a year and 52 cents go. Where those two numbers come from.
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Eight tax levers, ranked by what they are worth
Never selling is worth the whole 35 cents, the one-year line 17, an ETF about 120 basis points a year. Loss harvesting, the lever with the marketing budget, 0 to 30 after year five. Each one, priced.
How it works5 reads · 20 min
The mechanics and the numbers behind them.-
The lever worth the most is never selling
A $100,000 position with a $40,000 gain costs $14,040 of tax to sell. Held to the estate it costs nothing; given to charity it earns a deduction. The quiet lever at the top of the ranking.
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The one-year line is worth 17 cents per dollar
Everyone knows the line. In 2015 individuals still realized $3.3 billion of stock gains within three months of it, at the short-term rate. Where a known rule gets crossed early, and what it costs.
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Loss harvesting, in one example
Sell a stock at a $10,000 loss, buy a similar one the same day, and the loss cuts this year's tax bill by up to $5,210. What actually happened, step by step, and the catch.
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Why the harvesting benefit fades after a few years
In AQR's simulation harvesting adds 155 basis points in year one and nothing by year five without new cash. Live accounts show the same curve. Why it fades, and the three things that keep it alive.
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The wash-sale rule in four facts
Buy back the same stock within 30 days of selling it at a loss and the loss is disallowed. That part is well known. The four facts that catch households are about spouses, IRAs, brokers, and ETFs.
Go deeper2 reads · 6 min
Edge cases, products, and what could change.-
Two questions for any tax-savings pitch
Does the benefit last past year five? Does the long/short version make sense below $5 million? The published evidence says no to both as general claims. How to ask, and what a good answer sounds like.
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One rule holds up the ETF tax advantage, and Treasury is looking at it
As of September 2026 nothing pending changes the ranking of the levers. One live item: Treasury has said it is examining the in-kind mechanism behind every ETF's tax edge. A dated watchlist.