TLH frequency

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Topic Author
esipsi
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Joined: Mon Jul 26, 2021 8:54 am

TLH frequency

Post by esipsi »

Are there any other downsides to frequent TLH, besides just running out of TLH partners at some point ?
Does the paperwork/tax filing become too cumbersome ? Brokerage should do it all though.
Any other potential issues ?

Markets are continuing the downtrend, and hard to predict where we are headed.

Thanks.
livesoft
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Re: TLH frequency

Post by livesoft »

I never found a downside to tax-loss harvesting frequently, but I am not you. OTOH, I would probably not TLH more than once every 2 weeks.
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retired@50
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Re: TLH frequency

Post by retired@50 »

esipsi wrote: Thu May 12, 2022 11:14 am Any other potential issues ?
Maybe... Frequent trading restrictions, depending on whether you're using mutual funds or ETFs, and which brokerage you use.

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This is one person's opinion. Nothing more.
Topic Author
esipsi
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Re: TLH frequency

Post by esipsi »

Thanks folks.

Was wondering if too many TLHs can make it more likely to trigger a tax audit or something.
Morik
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Re: TLH frequency

Post by Morik »

The main blocker is as you said having enough TLH partners.

You don't want to pick TLH partners that you can't stick with for the long haul--you never know when the markets will go back up right after you TLH. So you don't want to be in a situation where you need to switch back out of the TLH partner back to your original investment, but you would have to take gains--possibly more gains than the losses you harvested, since you need to wait 30 days and the markets could go up a lot.

In my experience with relatively broad ETFs (things like 'large cap US', 'developed international markets', etc), there are maybe 3-4 ETFs that are acceptable to me.
At the extreme you could get a situation where you TLH one day, then TLH again the next day, and then again on the 3rd day, and now you are out of TLH partners and have to wait 28 days before you can TLH back into the original investment.

I think a reasonable rule of thumb is to wait a few weeks between TLH unless there is a massive drop that you want to harvest immediately in case the market goes back up. You could tweak this rule of thumb based on how many TLH partners you have. If you had an investment with 100 TLH partners then sure--TLH as often as you like. You won't run out even if you TLH 3 times a day every day (since after 30 days you can cycle back around to the start of your list).
If you have only one TLH partner (+ original investment), you are limited to once every 30 days.
2 TLH partners (+ original investment) can support 2 TLHs every 30 days.
etc.
nyone
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Re: TLH frequency

Post by nyone »

Why can’t you just TLH into the same partner as long as you don’t sell the partner within 30 days? Do you need a different partner each time?
eukonomos
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Re: TLH frequency

Post by eukonomos »

nyone wrote: Thu May 12, 2022 11:46 am Why can’t you just TLH into the same partner as long as you don’t sell the partner within 30 days? Do you need a different partner each time?
Say you TLH today by going from VTI to ITOT. Tomorrow they both drop further. You can exchange more VTI for ITOT - but what if you want to harvest the losses on the ITOT? You need another partner.
exodusNH
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Re: TLH frequency

Post by exodusNH »

esipsi wrote: Thu May 12, 2022 11:14 am Are there any other downsides to frequent TLH, besides just running out of TLH partners at some point ?
Does the paperwork/tax filing become too cumbersome ? Brokerage should do it all though.
Any other potential issues ?

Markets are continuing the downtrend, and hard to predict where we are headed.

Thanks.
You run out of partners pretty quickly and might wind up with a fourth choice option that you have to tolerate for years. E.g. you go from VTI to ITOT to SCHB. Now you have to look options like Russell 3000 or 1000, S&P 500, and VV. And after that you start getting creative like VUG & VTV.
Katietsu
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Re: TLH frequency

Post by Katietsu »

Yup. I am stuck right now. I sold when VTI was 211. Smallish loss but it gave me an opportunity to combine 8 tax lots into one. Bought ITOT. Now I have much bigger losses in ITOT. But what do I do? I still have a lot of VTI and ITOT that, hopefully will never go low enough for a loss. If I sell VTI and move to a third fund, I might be stuck with it indefinitely if we are at a low now not to be repeated after 30 days. So unless I decide to start moving retirement account stuff around, I am just waiting it out.
Topic Author
esipsi
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Joined: Mon Jul 26, 2021 8:54 am

Re: TLH frequency

Post by esipsi »

But what's the issue in being "stuck" with say SCHB ?
H-Town
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Re: TLH frequency

Post by H-Town »

esipsi wrote: Thu May 12, 2022 11:23 am Thanks folks.

Was wondering if too many TLHs can make it more likely to trigger a tax audit or something.
be careful. the IRS agents have teeth and they will bite :twisted:

they will knock on your door if you write off a Ferrari for your 'business', but they may not even text back if you just TLH a lot :mrgreen:
Time is the ultimate currency.
Raspberry-503
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Re: TLH frequency

Post by Raspberry-503 »

esipsi wrote: Fri May 13, 2022 12:19 am But what's the issue in being "stuck" with say SCHB ?
Not a big deal with SCHB, same ER, negligible differences in holdings, but for me it's the last good option. After that you start making tradeoffs in ER, in index (e.g. SP500 vs total market) etc...

The choices get even more limited with international where TLH partners don't necessarily have the same ER, don't hold the same funds (e.g. Korea is considered Developed by some indexes but not others so you could double-down on Korea or have it out of your portfolio depending on your mix of funds)
Raspberry-503
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Re: TLH frequency

Post by Raspberry-503 »

Deleted accidental double post
zlandar
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Re: TLH frequency

Post by zlandar »

livesoft wrote: Thu May 12, 2022 11:18 am I never found a downside to tax-loss harvesting frequently, but I am not you. OTOH, I would probably not TLH more than once every 2 weeks.
You have to hold an ETF/mutual fund/stock more than 60 days for qualified dividends. Otherwise it's taxed at ordinary dividends:

https://www.investopedia.com/terms/o/or ... idends.asp

For US-based large cap funds/ETFs like VTI which are >95% qualified dividends it could potentially increase what you owe in taxes.
livesoft
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Re: TLH frequency

Post by livesoft »

zlandar wrote: Fri May 13, 2022 6:58 am
livesoft wrote: Thu May 12, 2022 11:18 am I never found a downside to tax-loss harvesting frequently, but I am not you. OTOH, I would probably not TLH more than once every 2 weeks.
You have to hold an ETF/mutual fund/stock more than 60 days for qualified dividends. Otherwise it's taxed at ordinary dividends:

https://www.investopedia.com/terms/o/or ... idends.asp

For US-based large cap funds/ETFs like VTI which are >95% qualified dividends it could potentially increase what you owe in taxes.
It is true that it could potentially increase one's income taxes, but the reality is that the increase can be calculated ahead of time and would likely be insignificant. I showed this before: viewtopic.php?p=2728272#p2728272

People seem to fret over losing $1 to save $600. Sad.
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dratkinson
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Re: TLH frequency

Post by dratkinson »

Logistics. The need to meet all requirements. And multiple TLHs means multiple rolling requirements holding periods (replacement shares, QDI,...). Plus there comes a point of diminishing returns, when I may be too burnt out to pick up the last little bit.


Disclosure. I'm waiting to TLH 2x bond funds. I could TLH as they continue to drop. The rolling logistics periods would be a pain. That would get old. Fast.

Since it has taken ~2yrs to get into this economic situation, it could be that long to get out. I'm not really keen on TLHing for 2yrs.

So I've decided to wait while the bond funds' losses grow/stabilize/start to diminish, then I'll TLH. That way I'll get all I'm able to with one TLH. I like one-and-done.

Since I have banked carryover losses, I don't need to TLH this year. Hopefully I can TLH 1x next year and be done.

For now I'm just watching/recording my growing bonds' losses.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
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