MONDAY is the last day to obtain a 2012 Tax Loss Benefit

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MONDAY is the last day to obtain a 2012 Tax Loss Benefit

Postby Taylor Larimore » Sat Dec 29, 2012 4:33 pm

Bogleheads:

Bogleheads holding taxable securities with a loss should consider selling MONDAY if you want the tax-loss benefit on your 2012 federal income tax return.

This is not the usual slam-dunk decision primarily because of expected higher tax-rates next year. Our wiki can help:

Tax Loss Harvesting

Happy New Year!
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: MONDAY is the last day to obtain a 2012 Tax Loss Benefit

Postby LazyNihilist » Sat Dec 29, 2012 5:40 pm

I don't have a Tax Loss to harvest, but have some gains.

Is it advisable to sell my gains and re-buy the fund so that my gains are taxed at a lower rate?

:confused
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Re: MONDAY is the last day to obtain a 2012 Tax Loss Benefit

Postby plats » Sat Dec 29, 2012 9:25 pm

Don't worry about it. Those gains may be gone in the next couple of days.
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Re: MONDAY is the last day to obtain a 2012 Tax Loss Benefit

Postby Mel Lindauer » Sat Dec 29, 2012 10:27 pm

LazyNihilist wrote:I don't have a Tax Loss to harvest, but have some gains.

Is it advisable to sell my gains and re-buy the fund so that my gains are taxed at a lower rate?

:confused


If you do tax-GAIN harvest, then remember that the wash sale rules don't apply to GAINS (only losses).
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Re: MONDAY is the last day to obtain a 2012 Tax Loss Benefit

Postby dmcmahon » Sun Dec 30, 2012 1:50 am

LazyNihilist wrote:I don't have a Tax Loss to harvest, but have some gains.

Is it advisable to sell my gains and re-buy the fund so that my gains are taxed at a lower rate?

:confused


If you are paying 0% tax this year on the gains, the answer may be yes. Or if you are likely to sell within the next year, it may be yes. Don't forget to include state income taxes if any.

Everyone's situation is unique - for me, there seems no reason to gain harvest. In California I'd owe 15% to the Feds plus upwards of 10% to the state. Taking that hit in 2012 means my investment would drop by 1/4, and even though this is less than the hit next year, it implies a loss of the compounding benefits of deferring the tax to some indefinite far future point. That lost compounding benefit is significant for any time frame longer than a couple of years. The net change is 5%, plus 3.8% if you're subject to the new Medicare surtax. Against that are the likelihood of avoiding the surtax entirely on lower retirement income and/or the possibility of living in a state with a lower tax rate in retirement. Given this, I have gain harvested only positions that I was likely to sell within a few years anyway, in my case concentrated positions I don't plan to hold until I retire.
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Re: MONDAY is the last day to obtain a 2012 Tax Loss Benefit

Postby LazyNihilist » Sun Dec 30, 2012 4:02 am

Thanks for the replies everyone.
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