TLH [Tax Loss Harvesting]

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Topic Author
cals400ex
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TLH [Tax Loss Harvesting]

Post by cals400ex » Tue Oct 30, 2018 10:00 am

I am a little confused on properly TLH. For starters, I realize that you don't necessarily want to sell when a fund is low, but I am trying to understand the logistics behind TLH. For example:

1. If I purchase a fund within this calandar year and there is a loss, I can sell it and report my losses to my accountant at the end of the year? What if I purchase a fund and only hold it for 2 weeks and then sell it at a loss? Can I not do TLH because I have not held it for 30 days? I understand that I can not buy any exact or very similar fund back for 30 days after selling.

2. If I made several purchases of a fund over the last 2 years and my overall total for the fund is still positive, can I only TLH the purchases that have not netted a loss? For example, lets say that I have made 20 purchases of VTSAX over the last two years (I usually buy more once or twice a month, or whenever I have spare cash), how can I determine what I can TLH? Over the last couple years my overall total of the VTSAX is still positive, but the more recent purchases have been losses. BTW, I hold all of my funds at Vanguard so I am familiar with buying/selling with them.

I appreciate your help!

PFInterest
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Re: TLH

Post by PFInterest » Tue Oct 30, 2018 11:26 am

cals400ex wrote:
Tue Oct 30, 2018 10:00 am
For starters, I realize that you don't necessarily want to sell when a fund is low
no, that is the whole point of TLH
cals400ex wrote:
Tue Oct 30, 2018 10:00 am
1. If I purchase a fund within this calandar year and there is a loss, I can sell it and report my losses to my accountant at the end of the year?
it goes on your tax return, yes
cals400ex wrote:
Tue Oct 30, 2018 10:00 am
What if I purchase a fund and only hold it for 2 weeks and then sell it at a loss? Can I not do TLH because I have not held it for 30 days?
there is no holding requirement for TLH.
cals400ex wrote:
Tue Oct 30, 2018 10:00 am
2. If I made several purchases of a fund over the last 2 years and my overall total for the fund is still positive, can I only TLH the purchases that have not netted a loss?
no, you want to sell the funds with a loss. otherwise there is no loss to harvest. you are welcome to sell the gains, but that is tax gain harvesting.

mhalley
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Re: TLH

Post by mhalley » Tue Oct 30, 2018 11:32 am

If you sell within a year, then the loss is short term as opposed to long term and has its own rules. Check out the vanguard tlh page, and read the glass Alf full pdf in the link.
https://investor.vanguard.com/investing ... harvesting
You can sell different tax lots if you have your account setup for spec ID.
https://investor.vanguard.com/taxes/cost-basis/methods

Topic Author
cals400ex
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Joined: Wed Aug 01, 2012 8:38 pm

Re: TLH

Post by cals400ex » Tue Oct 30, 2018 12:08 pm

How can I tell which purchases are being sold at a loss at Vanguard? Maybe I just need to dig a little deeper on their site, but the overview shows my overall balance of any specific fund - It's not broken down into each individual purchase that I made.

Traveller
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Re: TLH

Post by Traveller » Tue Oct 30, 2018 12:12 pm

cals400ex wrote:
Tue Oct 30, 2018 12:08 pm
How can I tell which purchases are being sold at a loss at Vanguard? Maybe I just need to dig a little deeper on their site, but the overview shows my overall balance of any specific fund - It's not broken down into each individual purchase that I made.
From the "Balances and Holdings" page, click on "Cost Basis". From there you can click"show details" to see individual lots.

Topic Author
cals400ex
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Re: TLH

Post by cals400ex » Tue Oct 30, 2018 12:32 pm

Maybe I'm confused, but I can't sell specific purchases of a fund that has a loss? For example, my gain on VTSAX is positive for the year, but my last two individual purchases have netted a significant loss. Is there no way to sell just those two lot purchases?

MotoTrojan
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Re: TLH

Post by MotoTrojan » Tue Oct 30, 2018 12:38 pm

cals400ex wrote:
Tue Oct 30, 2018 12:32 pm
Maybe I'm confused, but I can't sell specific purchases of a fund that has a loss? For example, my gain on VTSAX is positive for the year, but my last two individual purchases have netted a significant loss. Is there no way to sell just those two lot purchases?
You'll want to change your cost basis method to specific ID first. Once that takes you'll see the individual lots.

Make sure you have a partner to swap into. You'd want to do an exchange into VLCAX (large-cap) or VFIAX (S&P500) so you maintain similar exposure but get the loss. If it drops more in the next 31 days you can use the 3rd partner and harvest again. If it drops more after 31 days you can swap back to VTSAX. Otherwise be ready/prepared to hold these alternate funds for life.

Watch out for dividends as they can cause wash sales too. You can't have bought the asset you are selling 31 days in the past, or in the future. If you bought it in the last 31 days but are also selling it as part of your harvest, that is okay; just can't remain after the sale for a loss.

Topic Author
cals400ex
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Re: TLH

Post by cals400ex » Tue Oct 30, 2018 12:49 pm

MotoTrojan wrote:
Tue Oct 30, 2018 12:38 pm
cals400ex wrote:
Tue Oct 30, 2018 12:32 pm
Maybe I'm confused, but I can't sell specific purchases of a fund that has a loss? For example, my gain on VTSAX is positive for the year, but my last two individual purchases have netted a significant loss. Is there no way to sell just those two lot purchases?
You'll want to change your cost basis method to specific ID first. Once that takes you'll see the individual lots.

Make sure you have a partner to swap into. You'd want to do an exchange into VLCAX (large-cap) or VFIAX (S&P500) so you maintain similar exposure but get the loss. If it drops more in the next 31 days you can use the 3rd partner and harvest again. If it drops more after 31 days you can swap back to VTSAX. Otherwise be ready/prepared to hold these alternate funds for life.

Watch out for dividends as they can cause wash sales too. You can't have bought the asset you are selling 31 days in the past, or in the future. If you bought it in the last 31 days but are also selling it as part of your harvest, that is okay; just can't remain after the sale for a loss.

Meaning, for me to be able to TLH a fund that I purchased 2 weeks ago that I want to sell now, I have to sell all of the fund?

panhead
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Re: TLH

Post by panhead » Tue Oct 30, 2018 1:26 pm

cals400ex wrote:
Tue Oct 30, 2018 12:49 pm
MotoTrojan wrote:
Tue Oct 30, 2018 12:38 pm
cals400ex wrote:
Tue Oct 30, 2018 12:32 pm
Maybe I'm confused, but I can't sell specific purchases of a fund that has a loss? For example, my gain on VTSAX is positive for the year, but my last two individual purchases have netted a significant loss. Is there no way to sell just those two lot purchases?
You'll want to change your cost basis method to specific ID first. Once that takes you'll see the individual lots.

Make sure you have a partner to swap into. You'd want to do an exchange into VLCAX (large-cap) or VFIAX (S&P500) so you maintain similar exposure but get the loss. If it drops more in the next 31 days you can use the 3rd partner and harvest again. If it drops more after 31 days you can swap back to VTSAX. Otherwise be ready/prepared to hold these alternate funds for life.

Watch out for dividends as they can cause wash sales too. You can't have bought the asset you are selling 31 days in the past, or in the future. If you bought it in the last 31 days but are also selling it as part of your harvest, that is okay; just can't remain after the sale for a loss.

Meaning, for me to be able to TLH a fund that I purchased 2 weeks ago that I want to sell now, I have to sell all of the fund?
You don't have to sell all of the fund, you have to sell all of the tax lots of that fund that you purchased in the 30 days prior to selling the fund, before selling any other lots you wish to TLH that are older than 30 days. If you haven't converted to SpecID for your cost basis, you will not see your tax lots. Also, if you have been selling this fund using Average Cost and then switch to SpecID, all of your shares up until this point will retain the average cost (assuming you were selling covered shares). Only purchases from now on will show up in tax lots with the actual cost.
At least that is how I understand it...

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Re: TLH [Tax Loss Harvesting]

Post by LadyGeek » Tue Oct 30, 2018 2:12 pm

I changed the thread title to help with the acronym.

The wiki has some background info: Tax loss harvesting

Also discussed: Wash sale

And: Cost basis methods

cals400ex - I assume this is for a taxable account (not an IRA).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

MotoTrojan
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Re: TLH

Post by MotoTrojan » Tue Oct 30, 2018 2:33 pm

panhead wrote:
Tue Oct 30, 2018 1:26 pm
. Also, if you have been selling this fund using Average Cost and then switch to SpecID, all of your shares up until this point will retain the average cost (assuming you were selling covered shares). Only purchases from now on will show up in tax lots with the actual cost.
At least that is how I understand it...
Maybe for MF but I thought it would take a few hoursdays and then update to SpecID as if you had done it all along.

panhead
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Re: TLH

Post by panhead » Tue Oct 30, 2018 2:42 pm

MotoTrojan wrote:
Tue Oct 30, 2018 2:33 pm
panhead wrote:
Tue Oct 30, 2018 1:26 pm
. Also, if you have been selling this fund using Average Cost and then switch to SpecID, all of your shares up until this point will retain the average cost (assuming you were selling covered shares). Only purchases from now on will show up in tax lots with the actual cost.
At least that is how I understand it...
Maybe for MF but I thought it would take a few hoursdays and then update to SpecID as if you had done it all along.
Yes, the OP specifically asked about a "fund" and I also only talk about "funds" in my response. If we are talking about individual stocks or ETFs, that is a different question.

If you convert to SpecID, it will take one day for Vanguard to update your account to show the individual lots so you are able to specify them at the time of sale, but the above still applies: If you had previously sold covered shares under average cost, you will see the individual tax lots, but my understanding is that all the tax lots will have the same cost (the average cost you saw before changing to specID) as all the shares have been averaged when the sale under average cost was done. Shares purchased of the fund after converting from average cost to specID, however, will show the actual cost you paid. Again, this only applies to selling covered shares. If you have never sold shares of this fund using average cost before, or if you only sold uncovered shares of this fund, then when you convert you will see your actual tax lots with the correct purchase prices for the covered shares. Notice that you will never see the actual lots or cost for uncovered shares as this was never tracked by Vanguard (Well, I'm sure it was tracked, but it wasn't required to be, as I understand it). This appears to agree with what posters here have been seeing, as well as the IRS regs, and my own limited experience.

Edited to add: I am assuming by "MF" you are referring to "Mutual Funds?"

Edited again for clarity

Edited 10 more times for even more clarity :happy

Topic Author
cals400ex
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Re: TLH [Tax Loss Harvesting]

Post by cals400ex » Tue Oct 30, 2018 3:50 pm

BTW, this is all in a taxable acct.

Also, while I didn't realize it mattered, I do have "index funds" and "stocks" in my taxable account. How would this TLH process change between the two?

I changed the cost basis to spec ID today for all stock and index funds in my taxable acct. So, I can see what that looks like tomorrow on the vanguard site.

panhead
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Re: TLH [Tax Loss Harvesting]

Post by panhead » Tue Oct 30, 2018 7:34 pm

cals400ex wrote:
Tue Oct 30, 2018 3:50 pm
BTW, this is all in a taxable acct.

Also, while I didn't realize it mattered, I do have "index funds" and "stocks" in my taxable account. How would this TLH process change between the two?

I changed the cost basis to spec ID today for all stock and index funds in my taxable acct. So, I can see what that looks like tomorrow on the vanguard site.
If it was in a tax advantaged account, you couldn't TLH anyway, although transactions in a tax advantaged account can still cause wash sales.

Since you changed all of your holdings in taxable to specID today, let us know what you see tomorrow. I'm not as familiar with the rules of stocks and ETFs, but I believe they default to fifo when selling (in Vanguard?), which is still a form of specID.

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