Bogleheads

[adam1712]

I just wanted to make sure I have this correct. I'm in the 15% tax bracket and as such, I have been selling funds with capital gains to take advantage of the 0% capital gains rate. However, I also have some funds now with losses in them. Am I correct that it would be foolish to tax loss harvest since it would just wash out my 0% capital gains?

[bertie wooster]

I'm in the same boat as you - and I agree it wouldn't make sense to try and TLH.

[PiperWarrior]

Yes, the 0% long-term capital gain tax rate and tax loss harvesting tend to be mutually exclusive. I don't know about your state income tax though.

[MOBoglehead]

I'm certainly no expert in tax loss harvesting, but even if your losses cannot be used to offset capital gains, why can't they still be used to offset income taxes owed ?

[carolo]

Could someone pls explain in detail the 0 cap gains tax in 2008?

During a time long ago and in what now seems like a land far away, we purchased INTC, MSFT, CSCO either when one went public or was still fairly new. Have been selling some ea yr and adding to either SPY or VG Total Stock Index, paying the tax and putting ourselves in higher bracket than we would otherwise be for marginal tax rate. Live in state w/ high state tax. (Oregon) Now retired, we're using after tax dollars from selling shares for part of our living expenses.

Many thanks in advance on details of cap gains tax law for 2008.
_________________
~Carol

[cudaman]

[PiperWarrior]

[PiperWarrior]

[cudaman]

[PiperWarrior]

[overpar]

OK assume this--before your TLH there's a 5,000 LTgain and other income that still leaves you at a 15% marginal rate. If you take a 5,000 loss, no tax benefit results. An additional 3,000 loss gives a 450 tax saving (3000 X 15%) State tax must also be considered

[adam1712]

[Dogfather]

I sold off funds in a taxable acct early this year to take advantage of the LT cap gains 0% rate. I also took a small ST gain to clean up the account and re-balance.

I now have about $5K of short term losses in two funds in this same taxable account. If I sell these two funds now, can I use the short term losses to offset the LT gains I realized earlier this year? Or would they only offset ST gains? Not quite sure how LT gains and ST losses interract for tax purposes.

[Charles Mahaffey]

You have to be careful in calculating your taxable income if you are trying to have a zero capital gain rate. The capital gain is included in the taxable income number that determines if the zero capital gain rate applies. If you have taxable income of $10,000 without any capital gains, which is well below the zero capital rate cutoff for single filing status, and add capital gains of $50,000 you will not qualify for a zero capital gain rate as I understand it. Thus, you must be very careful in your determination of taxable income including your realized capital gain. This isn't a free lunch.

[PiperWarrior]

[theduke]

It is generally not advantageous to TLH if you are taking advantage of the 0 capital gains rate. You should do the estimated figures for yourself to be sure. If your losses is substantially more than your gains, it may be beneficial. I would suggest you look at the Qual Div and Cap Gains Worksheet along with the Sch D and put in your estimated figures. You can use your 2007 tax return to get some of the numbers you might use.

The worksheet is on page 35, it's not really hard to figure, just go line by line.

http://www.irs.gov/pub/irs-pdf/i1040.pdf

[dbr]

One should also note than an effect of TLH is reduction of the cost basis in the investment. TLH when done at minimal tax savings may not be helpful in the long run.

When one has an advantage of no CG tax one might even harvest capital gains which increases the cost basis against future tax exposure.