Do people in the 15% tax bracket tax loss harvest?

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TMCD75
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Do people in the 15% tax bracket tax loss harvest?

Post by TMCD75 » Sun Aug 27, 2017 7:55 pm

Since the 15% tax bracket people do not pay capital gains taxes, should they tax loss harvest?

KlangFool
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by KlangFool » Sun Aug 27, 2017 7:59 pm

TMCD75 wrote:
Sun Aug 27, 2017 7:55 pm
Since the 15% tax bracket people do not pay capital gains taxes, should they tax loss harvest?
TMCD75,

Why not? They could use the capital loss to write off $3,000 worth of taxable income every year.

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by itstoomuch » Sun Aug 27, 2017 8:04 pm

We never had enough in taxables when we were in the 15% marginal.
We may have a small amount take a TLH 2017, (not sure, don't trade all that much in taxables) in the 25%
YMMV
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TMCD75
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by TMCD75 » Sun Aug 27, 2017 8:05 pm

Ok, question then. I purchased a 5k position of Trans Ocean (RIG) stock 3 years ago, it is only worth 1k as of tonight. I was simply going to sell it and take the cash and stuff my Roth with the 1k.

Tax loss harvesting would require me to purchase another similar stock, correct? I don't want to do that, I want to fund my Roth. Or am I way off base?

IlliniDave
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by IlliniDave » Sun Aug 27, 2017 8:14 pm

TMCD75 wrote:
Sun Aug 27, 2017 8:05 pm
Ok, question then. I purchased a 5k position of Trans Ocean (RIG) stock 3 years ago, it is only worth 1k as of tonight. I was simply going to sell it and take the cash and stuff my Roth with the 1k.

Tax loss harvesting would require me to purchase another similar stock, correct? I don't want to do that, I want to fund my Roth. Or am I way off base?
"Tax Loss Harvesting" as we use the term here usually means moving money between similar funds so your overall exposure does not change much while you get credit for your capital loss (or waiting 30 days and re-buying what you sold). In your case with a single stock you can realize the loss by selling it and write it off on your taxes. Since you are vacating a position with no intent to reestablish it, it's somewhat different than what's referred to as tax loss harvesting here, but it will still affect your taxes the same way. Tomato, Tomahto, IMO.
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by rec7 » Sun Aug 27, 2017 8:24 pm

Sure do. Not as much bang for the buck as the highest bracket put still is way to save money. I did get in a little trouble doing it. My income got so low I could not get obamacare after tax loss harvesting. I had to buy an active fund to get my income up. I know the irony of it all. LOL
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tj
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by tj » Sun Aug 27, 2017 8:30 pm

I personally would tax gain harvest in that bracket.

TMCD75
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by TMCD75 » Sun Aug 27, 2017 8:39 pm

Thanks, I think IlliniDave's post set me straight. Being firmly in the 15% tax bracket, I just don't worry about CG taxes. I do have a 25k taxable account that probably grew by 4k, but it's not enough to knock me out of the 15% tax bracket.

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Flobes
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by Flobes » Sun Aug 27, 2017 8:54 pm

TMCD75 wrote:
Sun Aug 27, 2017 8:05 pm
Ok, question then. I purchased a 5k position of Trans Ocean (RIG) stock 3 years ago, it is only worth 1k as of tonight. I was simply going to sell it and take the cash and stuff my Roth with the 1k.
Yes. Sell the loser.

Put the $1k into your Roth. Invest your Roth wisely. Stop gambling on speculative stocks.

You'll have a $4000 capital loss. $3000 loss will come off your 2017 income taxes income. $1000 will carry-forward to 2018
taxes return.
TMCD75 wrote:
Sun Aug 27, 2017 8:39 pm
I do have a 25k taxable account that probably grew by 4k...
However, selling something additional with a gain from your taxable accounts will eat away at this loss, even though the sale for a gain wouldn't otherwise incur any tax liability in the 15% bracket. So if you want to maximize the $4k loss, you won't be able harvest any gains.

Are you happy with how your $25k is invested?
Last edited by Flobes on Mon Aug 28, 2017 10:54 am, edited 2 times in total.

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by TMCD75 » Sun Aug 27, 2017 9:53 pm

I wasn't planning on selling anything from my taxable account. I'm simply going to sell the Trans Ocean position and move that money into my Roth.

I would've never bought the RIG stock if my EJ advisor hadn't turned me on to it. I'm away from EJ now, fully invested at VG.

Actually, my taxable account is invested in Franklin Templeton World Fund/TEMWX. I've had it since I was young, at least 28 years. I treat it like a backup cash account. Should I transfer it over to a Target Date Fund? Taxes would probably hurt me, I don't know?? What would it cost me to transfer to a lower cost Van Guard fund? I'm paying expensive fees on that account...

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by Dottie57 » Sun Aug 27, 2017 10:28 pm

TMCD75 wrote:
Sun Aug 27, 2017 9:53 pm
I wasn't planning on selling anything from my taxable account. I'm simply going to sell the Trans Ocean position and move that money into my Roth.

I would've never bought the RIG stock if my EJ advisor hadn't turned me on to it. I'm away from EJ now, fully invested at VG.

Actually, my taxable account is invested in Franklin Templeton World Fund/TEMWX. I've had it since I was young, at least 28 years. I treat it like a backup cash account. Should I transfer it over to a Target Date Fund? Taxes would probably hurt me, I don't know?? What would it cost me to transfer to a lower cost Van Guard fund? I'm paying expensive fees on that account...
Pull off the tax loss for this year. I would forget about temwx till next year. See what the poster above your last post said about selling with gains in stock the same year you get your loss. If you sell both you essentially lose your tax deduction from the loss.

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Flobes
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by Flobes » Sun Aug 27, 2017 11:12 pm

Dottie57 wrote:
Sun Aug 27, 2017 10:28 pm
TMCD75 wrote:
Sun Aug 27, 2017 9:53 pm
I wasn't planning on selling anything from my taxable account. I'm simply going to sell the Trans Ocean position and move that money into my Roth.

I would've never bought the RIG stock if my EJ advisor hadn't turned me on to it. I'm away from EJ now, fully invested at VG.

Actually, my taxable account is invested in Franklin Templeton World Fund/TEMWX. I've had it since I was young, at least 28 years. I treat it like a backup cash account. Should I transfer it over to a Target Date Fund? Taxes would probably hurt me, I don't know?? What would it cost me to transfer to a lower cost Van Guard fund? I'm paying expensive fees on that account...
Pull off the tax loss for this year. I would forget about temwx till next year. See what the poster above your last post said about selling with gains in stock the same year you get your loss. If you sell both you essentially lose your tax deduction from the loss.
Alternatively, sell the high-fee TEMWX in 2017. Then sell loss RIG January 2018; use proceeds to fund 2017 Roth contribution, with tax loss for 2018 and 2019.

Which strategy is better for you? It depends. We need more information to advise you.

Qs (answers affect both sell decisions as well as any buy recommendation):
* What is your gain in TEMWX? Do you know its cost basis?
* How much headroom do you have in the 15% bracket? Do you know how to compute this?
(=>How much of this ^gain could you "harvest" tax-free this year? All of it? Just a small bit?)
* Are you likely to remain in the 15% bracket?

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by inbox788 » Sun Aug 27, 2017 11:19 pm

tj wrote:
Sun Aug 27, 2017 8:30 pm
I personally would tax gain harvest in that bracket.
I'd be thinking along the same lines. Don't get why most folks here have talked about TLH instead of TGH.
https://www.bogleheads.org/wiki/Tax_gain_harvesting
If you windup in same tax bracket in retirement, you've benefited from tax deferment. A lower tax bracket wins, but is that likely? I'd be planning on retiring at a higher tax rate, so the deferment benefit is not expected to outweigh the higher future tax rate.

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by mega317 » Sun Aug 27, 2017 11:19 pm

TMCD75 wrote:
Sun Aug 27, 2017 9:53 pm
Actually, my taxable account is invested in Franklin Templeton World Fund/TEMWX. I've had it since I was young, at least 28 years. I treat it like a backup cash account.
You treat this as cash? It's a stock fund. It lost 60% in 08-09.

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by tj » Sun Aug 27, 2017 11:29 pm

inbox788 wrote:
Sun Aug 27, 2017 11:19 pm
tj wrote:
Sun Aug 27, 2017 8:30 pm
I personally would tax gain harvest in that bracket.
I'd be thinking along the same lines. Don't get why most folks here have talked about TLH instead of TGH.
https://www.bogleheads.org/wiki/Tax_gain_harvesting
If you windup in same tax bracket in retirement, you've benefited from tax deferment. A lower tax bracket wins, but is that likely? I'd be planning on retiring at a higher tax rate, so the deferment benefit is not expected to outweigh the higher future tax rate.
A lower tax bracket is mathematically impossible. if you are in the 15% bracket, your long term capital gains are taxed at 0. Hence, I would tax gain harvest if I was in the 15% tax bracket. Because your increasing your basis for free.

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by catdude » Sun Aug 27, 2017 11:53 pm

tj wrote:
Sun Aug 27, 2017 11:29 pm
A lower tax bracket is mathematically impossible. if you are in the 15% bracket, your long term capital gains are taxed at 0. Hence, I would tax gain harvest if I was in the 15% tax bracket. Because your increasing your basis for free.
Would you tax gain harvest in lieu of doing a Roth conversion? I've got $10K of available "space" in the 15% fed bracket; I've done Roth conversions the past couple years. Should I sell taxable investments (with embedded capital gains) instead?
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by Flobes » Mon Aug 28, 2017 12:02 am

tj wrote:
Sun Aug 27, 2017 11:29 pm
if you are in the 15% bracket, your long term capital gains are taxed at 0. Hence, I would tax gain harvest if I was in the 15% tax bracket. Because your increasing your basis for free.
If you have a capital loss or a carry-forward loss, then tax gains harvest in the 15% bracket is not free. It costs you the tax benefits of your loss: 15% to the feds plus perhaps state income taxes as well.

OP needs to sell a gain. And OP wants to sell a loss. If done in the same tax year, gain will consume the loss. Which comes first: the chicken or the cart?

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by IlliniDave » Mon Aug 28, 2017 5:54 am

inbox788 wrote:
Sun Aug 27, 2017 11:19 pm
tj wrote:
Sun Aug 27, 2017 8:30 pm
I personally would tax gain harvest in that bracket.
I'd be thinking along the same lines. Don't get why most folks here have talked about TLH instead of TGH.
https://www.bogleheads.org/wiki/Tax_gain_harvesting
If you windup in same tax bracket in retirement, you've benefited from tax deferment. A lower tax bracket wins, but is that likely? I'd be planning on retiring at a higher tax rate, so the deferment benefit is not expected to outweigh the higher future tax rate.
Mostly because the OP was a question on TLH. Harvesting gains is a reasonable idea too. Since it's already near the start of Q4, I'd look at doing one transaction this year and one next. If next year the expectation is a higher marginal bracket I'd take the gain this year and the loss next year (selling asap after 1/1/18). That is, unless the gain by itself would kick me into the 25% bracket, then I'd probably take both this year.
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by rkhusky » Mon Aug 28, 2017 7:10 am

TMCD75 wrote:
Sun Aug 27, 2017 8:05 pm
Ok, question then. I purchased a 5k position of Trans Ocean (RIG) stock 3 years ago, it is only worth 1k as of tonight. I was simply going to sell it and take the cash and stuff my Roth with the 1k.

Tax loss harvesting would require me to purchase another similar stock, correct? I don't want to do that, I want to fund my Roth. Or am I way off base?
TLH does not require you to purchase a similar stock. While many people do in order to maintain their asset allocation, you could also use it for rebalancing or to maintain your glide path. Or to move money from taxable to a Roth account.

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by dodecahedron » Mon Aug 28, 2017 7:40 am

tj wrote:
Sun Aug 27, 2017 11:29 pm
A lower tax bracket is mathematically impossible. if you are in the 15% bracket, your long term capital gains are taxed at 0. Hence, I would tax gain harvest if I was in the 15% tax bracket. Because your increasing your basis for free.
Warning: tax gain harvesting is not always "increasing your basis for free." Even though the gains themselves may be taxed at 0% on your federal tax bill, the gains will still increase your AGI, which could cause a variety of expensive consequences (e.g., loss of eligibility for tax credits, increased taxable SS, loss of eligibility for senior citizen property tax breaks, higher thresholds for deductible medical expenses, etc.)

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by kaneohe » Mon Aug 28, 2017 8:25 am

Flobes wrote:
Sun Aug 27, 2017 8:54 pm
TMCD75 wrote:
Sun Aug 27, 2017 8:05 pm
Ok, question then. I purchased a 5k position of Trans Ocean (RIG) stock 3 years ago, it is only worth 1k as of tonight. I was simply going to sell it and take the cash and stuff my Roth with the 1k.
Yes. Sell the loser.

...........................................................

You'll have a $4000 capital loss. $3000 loss will come off your 2017 income taxes. $1000 will carry-forward to 2018 taxes.

..............................................................
wording is a bit misleading............$3000 loss will come off 2017 income (not taxes). $1000 (loss) will carryforward to 2018 return
(not taxes).

TMCD75
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by TMCD75 » Mon Aug 28, 2017 11:41 am

To answer someone's question above, we have thousands of dollars of space left in the 15% TB. Actually, I could sell my taxable position I referred to above, 25k account, and still be in the 15% TB.

Anyway, the consensus seems to be that I should sell the RIG stock and then apply that money to my Roth IRA. It would also allow me to take a 3k write off on this year's income and carry over 1k to next year's income. Correct?

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by triceratop » Mon Aug 28, 2017 12:32 pm

I tax loss harvested quite a bit in 2015. I will be tax gain harvesting this year. I have been in the 15% tax bracket. Just an educated guess but I may need to tap some savings for a downpayment in the medium term and I'm certain my tax situation will be less favorable at that time.

Don't forget about state taxes, if applicable.
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Re: Do people in the 15% tax bracket tax loss harvest?

Post by tj » Mon Aug 28, 2017 12:57 pm

dodecahedron wrote:
Mon Aug 28, 2017 7:40 am
tj wrote:
Sun Aug 27, 2017 11:29 pm
A lower tax bracket is mathematically impossible. if you are in the 15% bracket, your long term capital gains are taxed at 0. Hence, I would tax gain harvest if I was in the 15% tax bracket. Because your increasing your basis for free.
Warning: tax gain harvesting is not always "increasing your basis for free." Even though the gains themselves may be taxed at 0% on your federal tax bill, the gains will still increase your AGI, which could cause a variety of expensive consequences (e.g., loss of eligibility for tax credits, increased taxable SS, loss of eligibility for senior citizen property tax breaks, higher thresholds for deductible medical expenses, etc.)
Very true, i am 32 and in accumulation phase, also no carryover losses, so thoae don't apply. Should have specified

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Re: Do people in the 15% tax bracket tax loss harvest?

Post by House Blend » Mon Aug 28, 2017 2:44 pm

tj wrote:
Sun Aug 27, 2017 11:29 pm
inbox788 wrote:
Sun Aug 27, 2017 11:19 pm
tj wrote:
Sun Aug 27, 2017 8:30 pm
I personally would tax gain harvest in that bracket.
I'd be thinking along the same lines. Don't get why most folks here have talked about TLH instead of TGH.
https://www.bogleheads.org/wiki/Tax_gain_harvesting
If you windup in same tax bracket in retirement, you've benefited from tax deferment. A lower tax bracket wins, but is that likely? I'd be planning on retiring at a higher tax rate, so the deferment benefit is not expected to outweigh the higher future tax rate.
A lower tax bracket is mathematically impossible. if you are in the 15% bracket, your long term capital gains are taxed at 0. Hence, I would tax gain harvest if I was in the 15% tax bracket. Because your increasing your basis for free.
One of the risks of Gain Harvesting is that you may be harvesting shares that will never be spent during your lifetime.

In any case, regardless of the rates you pay on LTCG now or later, there's no value to gain harvesting except in the case where you (not your beneficiaries) spend or sell the harvested shares.

For example, if your RMDs + SS + dividends from taxable will generate more income in retirement than you need for spending (a scenario that fits many over-saving Bogleheads to a T), then you won't be exposed to capital gains in your post-70.5 years. It doesn't even matter if you were paying 0% LTCG rates in your pre-70.5 years. Now that you are above 70.5 and don't need more income you'll be buying new taxable shares, not selling them. Any gain harvesting you did previously for shares you currently own haven't gained you anything. And they filled up tax bracket space that could have been used for Roth conversions.

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