kaneohe wrote:You might need to model your situation since it might depend on your specific assumptions. Leaving stocks in the Roth might grow faster than in taxable with loss carryover but on the other side, bonds is taxable will yield less than bonds in Roth .
Ozonewanderer wrote:I will probably die before I could use it up in annual $3,000 deductions against my income.
How old are you? What makes you think that you won't be able to off-set those losses with gains in the future? Capital loss carryovers are extremely valuable. I also have six-digit carryover losses from when I tax-loss harvested in 2008, and I'm not to not show any capital gain on my Schedule D for many, many years to come.
Over course, if you are 90 years old or have a terminal illness, that's a different story!
Scooter57 wrote:Your tax bracket now as opposed to later matters too. The losses are more valuable written off against money thst would have been taxed in a high bracket.
hollowcave2 wrote:Someone will have to enlighten me. Does the IRS give you a choice as to when to use your carryover? I thought you just filled out the worksheet. Seems to me that if you skip years and then claim the carryover loss later, that's a good reason for an audit.
Scooter57 wrote:What I meant was that if I'm in the 35% bracket this year and am able to use losses to offset capital gains that would otherwise be taxed at 20% I am saving more than if I wait until retirement when I am in the 25% bracket where the same gain would only be taxed at 15% or I'm in the 15% bracket when my capital gains aren't taxed.
adam1712 wrote:What are you planning to rebalance into in your taxable account when you sell stocks? It's not clear what type of rebalancing you're trying to do. If you're selling stocks to buy bonds in taxable, that's likely to be tax inefficient over time.
Ozonewanderer wrote:I am selling stocks to get back to my target AA. I'm a little stock heavy. I may put the money into Muni bond fund or cash. I don't think that influences whether to avoid using my carryover capital losses, does it?
Artsdoctor wrote:"Just know that the Muni bond fund will perform worse than a regular bond fund held in a Roth."
Is that true? I agree that it's possible . . .
But the average annual return for 3 years ending 3/31/13 for Total Bond Fund was 5.49% whereas the CA Intermediate-Term Fund was 6.28%. As reported by Vanguard, if I'm reading their website correctly.
And that's not taking into consideration tax issues.
Ozonewanderer wrote:Thank you all for your thoughts. I had already decided that I want to take some money out of the market (not a large % of my portfolio). I am not trying to use my carryover losses for the heck of it, and I do have the option of selling some funds in a Roth IRA instead. I was trying to determine if there is a compelling reason not to use the carryover losses and so far I don't see one. I see a better rationale for letting my stock fund continue to grow in the Roth because its growth and withdrawals will be tax free. I will also only be using a small % of my carryover losses so I think that's what I am going to do. This discussion has helped me, so thanks!
cheesepep wrote:I just think it is weird that the deduction for a capital loss is $3,000 now and was $3,000 at least 5 years ago. That figure should be $5,000 minimum.
Artsdoctor wrote: In the ideal world, anyone in the accumulation phase of investing should never have a significant capital gain on their tax form if they've been tax-loss harvesting correctly. You usually want to see that -$3,000 on your 1040 unless there are extenuating circumstances. In the retirement phase, that's a different story, of course.
Ozonewanderer wrote:This seems related to my point that if I use up $10,000 of carryover capital loss to offset $10,000 of gains now, that the finacial benefit to me is greater than using that same amount of loss to offset $10k of gains say ten years later. The $10k isn't worth as much due to inflation. No?
Adam: The intermediate-term bond fund you mention is 50% treasuries with a duration of 6.5 years. I don't know this for sure, but I'm going to guess that the CA intermediate-term muni fund will be less risky and will outperform your VBILX over the next few years in tax-adjusted returns. Let's put it on the calendar and check back in 5 years.
Ozonewanderer wrote:cheesepep wrote:I just think it is weird that the deduction for a capital loss is $3,000 now and was $3,000 at least 5 years ago. That figure should be $5,000 minimum.
This seems related to my point that if I use up $10,000 of carryover capital loss to offset $10,000 of gains now, that the finacial benefit to me is greater than using that same amount of loss to offset $10k of gains say ten years later. The $10k isn't worth as much due to inflation. No?