"3 Ways to Cut Your Investment Tax Bill"

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Taylor Larimore
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"3 Ways to Cut Your Investment Tax Bill"

Post by Taylor Larimore »

Bogleheads:

Allan Roth, CPA, CFP, is my friend and the finance writer for AARP. He is a master at making complex theory simple to understand. Allan taught me much of what I know. In his latest article for AARP, Allan recommends three important ways to reduce taxes on our investments:

1. Buy tax-efficient investments. -- A low-cost index fund such as the Vanguard Total Stock ETF (VTI) has very little turnover and allows investors to be in control of when or if they take the gain. Since it essentially owns every publicly held company based in the U.S., it doesn't have to buy or sell stocks and rarely passes on any capital gains until you sell.

2. Keep your assets in accounts that are the most tax-efficient:

Assets to place in tax-deferred accounts include:
* Bonds
* CDs
* REITs
* Stocks or stock mutual funds that trade stocks actively

Assets to put in taxable accounts include:
* Low-turnover equity mutual funds
* Individual stocks held for long periods

3. Harvest your tax losses. -- Losses have great value when tax time rolls around.

You can read Allan's complete article here:

Three Ways To Cut Your Investment Tax Bill

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
frisbee
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Re: "3 Ways to Cut Your Investment Tax Bill"

Post by frisbee »

Is there a mechanism (automated report) within Vanguard to identify opportunities to Tax Harvest? I use specific identification, but as far as I can tell, I have to individually research the cost basis of each holding?
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BL
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Re: "3 Ways to Cut Your Investment Tax Bill"

Post by BL »

frisbee wrote:Is there a mechanism (automated report) within Vanguard to identify opportunities to Tax Harvest? I use specific identification, but as far as I can tell, I have to individually research the cost basis of each holding?
I go to the Balances and Holdings page, click on Cost Basis in joint account, click on Show Details of fund to see details on each purchase.
highercall
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Re: "3 Ways to Cut Your Investment Tax Bill"

Post by highercall »

A good reminder, thanks for posting Taylor.

Happy Easter to all!
frisbee
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Re: "3 Ways to Cut Your Investment Tax Bill"

Post by frisbee »

BL wrote:
frisbee wrote:Is there a mechanism (automated report) within Vanguard to identify opportunities to Tax Harvest? I use specific identification, but as far as I can tell, I have to individually research the cost basis of each holding?
I go to the Balances and Holdings page, click on Cost Basis in joint account, click on Show Details of fund to see details on each purchase.
Yeah, that's what I'm doing. It'd be nice if I could run a report that summarized all my negative holdings so I could quickly understand what I should harvest. I suspect it's in Vanguard's best interest not to encourage TLH due to increased trading.
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Taylor Larimore
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Vanguard Tax-Loss Harvesting Study

Post by Taylor Larimore »

Bogleheads:

This is a Vanguard study about "Tax-Loss Harvesting":

Glass half full: The silver lining of capital losses

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "3 Ways to Cut Your Investment Tax Bill"

Post by abuss368 »

Thanks Taylor!

Many investors forget that taxes are an additional cost.
John C. Bogle: “Simplicity is the master key to financial success."
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Brian 2016
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Re: "3 Ways to Cut Your Investment Tax Bill"

Post by Brian 2016 »

Thanks for the posting and the additional link.

Good stuff.

Brian
Early Retirement May 2016
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