Curt Overway, Co-Head of Natixis Investment Managers Solutions, offers insight on the tax impact of equity market returns in the first quarter and potential regulation changes that would affect taxable investors. Highlights include:

  • Broad stock market declines in 1Q22 provided abundant opportunities for tax loss harvesting in separately managed account portfolios.
  • As the chart shows, stock losers outnumbered winners for the first time since 2018, providing ample opportunities to harvest losses.

    S&P 500® Winners and Losers by Calendar Year winners and losers by calendar year from 1990 to 2022
    Source: Thomson Reuters, Standard & Poor’s, Natixis Investment Managers Solutions. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.

  • But the dispersion of returns during the quarter was very broad, meaning losses could be used to offset taxable gains.

    Return Distribution Across S&P 500® Stocks Over Past 8 Quarters Return Distribution Across S&P Stocks Over Past 8 Quarters from 2020 to 2022
    Source: Thomson Reuters, Standard & Poor’s, Natixis Investment Managers Solutions. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.

  • There was also movement from Washington related to taxes. As the quarter ended, President Biden’s budget included a new proposal dubbed the Billionaire Minimum Income Tax (BMIT).
  • The BMIT would apply a minimum tax of 20% on households with a net worth over $100 million and would include unrealized capital gains.
  • The House also overwhelmingly passed SECURE 2.0, which seeks to increase contribution limits to retirement plans and raise the age limit for taking Required Minimum Distributions (RMDs) from those accounts.

For more information, please read the full Tax Management Update – Q1 2022.

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Tax Management Update – Q1 2022

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A tax liability is the total amount of tax debt owed by an individual, corporation or other entity to a taxing authority.

Capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.

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