Tax loss harvesting in brokerage accounts

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Prettyfrtnt
Posts: 81
Joined: Fri Aug 23, 2019 6:28 pm

Tax loss harvesting in brokerage accounts

Post by Prettyfrtnt » Wed Sep 11, 2019 2:27 pm

How do people enlarge from the 3 fund approach in their brokerage account to diversify holdings and allow for future tax loss harvesting. I’m using specid so it seems like if something goes down I can harvest a 3k loss. Would it not behoove me to own something like VOO s and p index and a small cap index fund to approximate the VTI? Do people do this? Or should I forget about tax loss harvesting. I’m in the 37/5 bracket and it would be nice to drop my taxes 3k a year. Does anyone have a strategy for this? Clearly I don’t want losers but it does seem to be smart to somehow expand beyond the 3fund. Thanks for any advice. Maybe this isn’t worth the time.

NxNW
Posts: 28
Joined: Fri Sep 14, 2018 12:15 pm

Re: Tax loss harvesting in brokerage accounts

Post by NxNW » Wed Sep 11, 2019 2:37 pm

I’m interested in this topic as well. Just starting to invest in taxable accounts so it seems like the time is ripe to learn more.

Living Free
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Re: Tax loss harvesting in brokerage accounts

Post by Living Free » Wed Sep 11, 2019 3:01 pm

I wouldn't worry about the small cap fund. Just tax loss harvest between the total market index fund, s&P 500 index fund, and large cap index fund (i think ticker for vanguard is vv). If you end up with large holdings in taxable in the S&P 500 or large cap index you could supplement with an extended market or small cap fund in something like a Roth IRA. or just not do that and it would probably be totally fine too.

see this post for instructions on how to TLH: viewtopic.php?t=172568

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dwickenh
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Re: Tax loss harvesting in brokerage accounts

Post by dwickenh » Wed Sep 11, 2019 3:18 pm

Living Free wrote:
Wed Sep 11, 2019 3:01 pm
I wouldn't worry about the small cap fund. Just tax loss harvest between the total market index fund, s&P 500 index fund, and large cap index fund (i think ticker for vanguard is vv). If you end up with large holdings in taxable in the S&P 500 or large cap index you could supplement with an extended market or small cap fund in something like a Roth IRA. or just not do that and it would probably be totally fine too.

see this post for instructions on how to TLH: viewtopic.php?t=172568
This ^^

I tax loss harvested VTSAX(Vanguard total US market) for VFIAX(Vanguard S&P 500) in July for over 3000 loss.

No need to complicate your portfolio just to tax loss harvest.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

megabad
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Re: Tax loss harvesting in brokerage accounts

Post by megabad » Wed Sep 11, 2019 3:20 pm

Prettyfrtnt wrote:
Wed Sep 11, 2019 2:27 pm
Would it not behoove me to own something like VOO s and p index and a small cap index fund to approximate the VTI? Do people do this?
You can do this or you can just hold different indices. Seek wiki here for ETF subsitutes https://www.bogleheads.org/wiki/Tax_los ... tute_funds

Or should I forget about tax loss harvesting. I’m in the 37/5 bracket and it would be nice to drop my taxes 3k a year. Does anyone have a strategy for this? Clearly I don’t want losers but it does seem to be smart to somehow expand beyond the 3fund. Thanks for any advice. Maybe this isn’t worth the time.
Totally up to you whether it is worth it. I think for folks that are able to continuously invest a significant amount into a taxable account, it is pretty easy to realize $3k in losses each year and takes very little effort. Even when you can't you can typically wait till a down year and at least carryover some losses. Obviously, you should do the 401ks, IRAs, HSAs first though as these are generally worth more.

delamer
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Re: Tax loss harvesting in brokerage accounts

Post by delamer » Wed Sep 11, 2019 3:22 pm

To clarify, your taxable income will go down by $3000 not your actual taxes.

retiredjg
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Re: Tax loss harvesting in brokerage accounts

Post by retiredjg » Wed Sep 11, 2019 3:41 pm

Prettyfrtnt wrote:
Wed Sep 11, 2019 2:27 pm
Or should I forget about tax loss harvesting. I’m in the 37/5 bracket and it would be nice to drop my taxes 3k a year. Does anyone have a strategy for this? Clearly I don’t want losers but it does seem to be smart to somehow expand beyond the 3fund. Thanks for any advice. Maybe this isn’t worth the time.
The best two funds to hold in taxable are a total stock and a total international index funds. Go ahead and start investing that way now and get your balances up. Pick out your tax loss harvesting partners now - a similar fund that you are willing to stay in for a long time if needed. Then just sit back and wait.

When the market actually does take a big downward turn and it lasts awhile, you will be able to harvest thousands of dollars of losses when you can then use at $3k a year for many years in the future.

What I'm saying is forget the tiny little TLH opportunities that you may get in the current market. It's just too much trouble and takes too much time and effort and does not see worth it for you. Get ready now, wait for "the big one", harvest 2 or 3 times over a year or so and bank those losses for the future and call it good.

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TierArtz
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Re: Tax loss harvesting in brokerage accounts

Post by TierArtz » Wed Sep 11, 2019 4:12 pm

A week ago I sold all lots of VG Total International Stock Index (VTIAX) with a loss (happened to be all of them) in my father's brokerage account by exchanging them (same day) for VG FTSE All World ex US Index to harvest about $2800 in losses. It would have been about a $4K loss, but the market went up (VGD) the day the transactions executed.

At the time, I did not TLH lots of Total Stock Market (VTSAX) with a loss via exchange to VG S&P 500 (VFIAX) for another $2k of losses because I'd recently bought some in his IRA. Now, things have sprung back and there's only one VTSAX lot with a tiny loss.

I'd considered adding VG Total World Stock Index (VTWAX) and rotate sales of lots with losses between those three in the future. But, then I'd have the higher ER of VTWAX and harder math to keep international stock at 40%. I think it would make more sense to add VFIAX and use two pairs instead of a trio for TLHing.

My 82 year old father is still adding to his taxable brokerage via transfer of unneeded income from checking to the settlement fund. I'll add to the "leaking bucket" monthly unless I'm contemplating a TLH move requiring 30 days of patience.

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Hector
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Re: Tax loss harvesting in brokerage accounts

Post by Hector » Wed Sep 11, 2019 4:23 pm

Prettyfrtnt wrote:
Wed Sep 11, 2019 2:27 pm
How do people enlarge from the 3 fund approach in their brokerage account to diversify holdings and allow for future tax loss harvesting. I’m using specid so it seems like if something goes down I can harvest a 3k loss. Would it not behoove me to own something like VOO s and p index and a small cap index fund to approximate the VTI? Do people do this? Or should I forget about tax loss harvesting. I’m in the 37/5 bracket and it would be nice to drop my taxes 3k a year. Does anyone have a strategy for this? Clearly I don’t want losers but it does seem to be smart to somehow expand beyond the 3fund. Thanks for any advice. Maybe this isn’t worth the time.
How about replace VTI (which tracks CRSP US Total Market Index) with some provider's total stock market ETF/Fund which tracks other total stock market index. For example, Schwab tracks Dow Jones U.S. Total Stock Market Index, fidelity has its own index with ZERO index fund.

BigJohn
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Re: Tax loss harvesting in brokerage accounts

Post by BigJohn » Wed Sep 11, 2019 4:32 pm

My tax loss harvesting pairs are Total Stock/S&P 500 and Total International Stock/FTSE All World Index. I have a preference for the total stock versions as more inclusive but have stayed in the others for long periods waiting for a loss. While waiting, I have not added anything to try to make up for the difference as I view it as too small to justify the added complexity.

SDLinguist
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Re: Tax loss harvesting in brokerage accounts

Post by SDLinguist » Thu Sep 12, 2019 12:04 pm

Last year I harvested around 7k losses in December I had bought our TSM and Total international funds in July after selling my ESPP shares. In December I sold the lots with losses in the TSM and replaced with SP 500 fund. I went from iShares total international to vangaurd total international. I payed the $5 commission. ( Since wife works for a financial firm everything is ETFs at Fidelity since they don't require pre-authorization to buy or sell)

Wrote off 1k in gains and 3k in income. This year will use the remaining 3k in income.

First time is nerve wracking. Just pick good partner funds. Biggest headache is keeping track of dates to avoid wash sales so I recommend keeping the number of purchases per year small.

If you can, try and fill IRAs right at the begining of the year since they do count for wash sales.

Fishing50
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Re: Tax loss harvesting in brokerage accounts

Post by Fishing50 » Fri Sep 13, 2019 8:53 am

I think tax loss harvesting is worth the small effort required.

US Equities TSM (VTSAX), S&P 500 (VFIAX), Large Cap (VLCAX).
International Total Intl (VTIAX), FTSE All-World (VFWAX), Developed Markets (VTGMX).

Late 2018 was pretty active tax loss harvesting for us, we're still holding VTGMX, VTIAX, VTSAX, VFIAX from Dec 2018 harvesting. We turned off automatic reinvesting in all those securities in all accounts to simplify wash sale. 4 times a year I log in to reinvest in Roth accounts, and we spend or invest dividends from taxable brokerage.
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

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