M1 does not offer tax loss harvesting, but we do use a tax minimization strategy when selling securities. This article explains what tax loss harvesting is, how M1’s approach differs, and what to expect when you sell investments on our platform.
What is Tax Loss Harvesting?
Tax loss harvesting is an investing strategy where investors sell securities at a loss to offset gains in other investments. This can reduce your taxable capital gains for the year.
Important: M1 does not offer tax loss harvesting. We do not automatically sell securities at a loss specifically to reduce your taxes or provide year-round tax loss harvesting management.
How M1’s tax minimization strategy works
Instead of formal tax loss harvesting, M1 uses an algorithm designed to minimize your tax burden when you sell. When you initiate a withdrawal that requires selling securities, or when you manually sell all or part of your portfolio, M1 will:
Identify the most overweight Slices in your Pie to bring them back to your target allocations.
Sell tax lots in order of lowest to highest tax burden.
This order is meant to lower your capital gains when possible.
Tax lot sell order
M1’s sell order for taxable (Invest) accounts is:
Short-term capital losses (largest loss to smallest)
Long-term capital losses (largest loss to smallest)
Short-term zero gain/loss
Long-term zero gain/loss
Long-term capital gains (smallest gain to largest)
Short-term capital gains (smallest gain to largest)
Example:
You need to sell $1,000 from a slice with several lots:
Lot A: Short-term loss of -$200
Lot B: Long-term loss of -$50
Lot C: Long-term gain of $20
Lot D: Short-term gain of $10
Result: M1 will sell from Lot A first, then B, then C, then D, following the order above, aiming to minimize the taxes you owe.
What about manual sell orders?
If you manually sell specific slices, M1 will use this same tax minimization order for the securities sold in that slice.
Crypto accounts
Crypto trading on M1 uses the FIFO (First In, First Out) method for all sell orders. This means the first crypto purchased is the first sold. For all other investment accounts, FIFO and LIFO tax lot selection is not available—only M1’s tax minimization strategy applies.
M1 and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.
All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary.
Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.
This content was generated using artificial intelligence and is intended for informational and educational purposes only. While reasonable efforts are made to ensure accuracy, AI-generated outputs may omit key context; and should not be construed as financial, investment, legal, or tax advice. Users should independently verify all information and consult a qualified professional before making any financial decisions.
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