TLH for absolute dummies [Tax Loss Harvesting]

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Roothy
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Roothy » Mon Sep 28, 2015 1:46 pm

livesoft wrote:Have we created a Monster? ;)

LOL--yes. My next project: mega back door Roths. You will be seeing me again, my friend.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Roothy » Mon Sep 28, 2015 3:11 pm

Well, that sucked. I waited until 15 minutes before closing to try to make my roundtrip home--and Vanguard's website would not let me do it, because they GRANDFATHERED me into the 60 day restriction for frequent trading. Of course, the website itself doesn't tell me that--I had to call to find out, and they put me on hold so long I didn't have time to do an "automatic investment" work-around.

I am SO FRUSTRATED right now. But beware, those of you who did a TLH before the 16th of this month--you will be limited by Vanguard from rebuying for 60 days, unless you do a work-around.

Now I am all-out rooting for the market to implode tomorrow...

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by zzcooper123 » Mon Sep 28, 2015 4:12 pm

Have we come to consensus on the six month Rule for tax loss harvesting tax free bond funds? Has anyone done this on Vanguard?

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Barefootgirl » Mon Sep 28, 2015 8:10 pm

TLH is a topic that (for me, anyway) makes complete sense in theory, but I got quite hung up in figuring out the application of it.

Appreciate your lead on this Roothy.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by randomizer » Mon Sep 28, 2015 8:49 pm

Roothy wrote:Now I am all-out rooting for the market to implode tomorrow...
This seems a bit perverse. By all means, harvest your losses when the opportunity presents itself, but don't lose sight of the fact that we generally want the market to go up.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Roothy » Tue Sep 29, 2015 7:18 am

randomizer wrote:
Roothy wrote:Now I am all-out rooting for the market to implode tomorrow...
This seems a bit perverse. By all means, harvest your losses when the opportunity presents itself, but don't lose sight of the fact that we generally want the market to go up.
I'm pretty sure I'm not omnipotent, so you're safe. ;)

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by fortyofforty » Thu Oct 01, 2015 8:30 pm

Can someone explain a bit more about the difference between short term losses and long term losses, and why it's preferable to harvest one and not the other? Thanks. So much to learn....

(I have no doubt it's covered but from what I've read in our wiki materials and this forum, it's not explained clearly. I'm probably missing it, of course.)
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by fortyofforty » Thu Oct 01, 2015 8:32 pm

randomizer wrote:
Roothy wrote:Now I am all-out rooting for the market to implode tomorrow...
This seems a bit perverse. By all means, harvest your losses when the opportunity presents itself, but don't lose sight of the fact that we generally want the market to go up.
Thanks for writing what I was thinking. I'd be thrilled if I NEVER had losses to harvest.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by House Blend » Fri Oct 02, 2015 9:26 am

fortyofforty wrote:Can someone explain a bit more about the difference between short term losses and long term losses, and why it's preferable to harvest one and not the other? Thanks. So much to learn....

(I have no doubt it's covered but from what I've read in our wiki materials and this forum, it's not explained clearly. I'm probably missing it, of course.)
Some members of the forum are fond of over-emphasizing the preference for short term losses, leading to unnecessary stress for forum newbies still trying to figure things out.

Until you are ready to take the advanced course on TLH, simply harvest losses when they are big enough to be worthwhile. Ignore whether they are long or short.

FWIW, here is what it takes for it to matter:

1. It is a tax year in which you will have realized short term capital gains. (If you have no reason or need to sell for a short term gain, it cannot matter.)

AND

2. All of the losses you are able to harvest this year, plus all previous carryover losses, will not be enough to cancel out all of the capital gains you will be realizing this year.

AND

3. After canceling out all of the accumulated losses against all of the gains, some of the gains left over turn out to be short term.

If all three of those conditions hold, then you will wish that more of your losses were short instead of long. The point is that short term gains are taxed as ordinary income instead of at the lower long term rate.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by livesoft » Fri Oct 02, 2015 9:36 am

Long-term vs short-term is easy because one should never have any long-term losses.

OK, "never" is the wrong word, but let's say very very rarely. The reason is because one should harvest all their losses before they become long-term losses. While it is possible for those shares with long-term gains to have those gains turn into losses, I think it would take a pretty good market correction for that to happen.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by House Blend » Fri Oct 02, 2015 9:55 am

^Huh? All it takes to have long term losses is periodic investing during a multi-year rise + fall. A 1.5 year run-up, followed by a 1.5 year run- down would suffice.

FWIW, three times in the past year I have harvested long term losses (along with short term losses at the same time).

1. 10/15/2014 (sold shares bought on 5/23/2013).
2. 8/21/2015 (sold shares bought on 3 more dates in 2013).
3. 9/24/2015 (sold shares bought in 2011, 2012, and 2013).

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Roothy » Fri Oct 02, 2015 2:19 pm

fortyofforty wrote:
randomizer wrote:
Roothy wrote:Now I am all-out rooting for the market to implode tomorrow...
This seems a bit perverse. By all means, harvest your losses when the opportunity presents itself, but don't lose sight of the fact that we generally want the market to go up.
Thanks for writing what I was thinking. I'd be thrilled if I NEVER had losses to harvest.
Irony doesn't translate well online, I guess.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by dratkinson » Fri Oct 02, 2015 3:06 pm

fortyofforty wrote:Can someone explain a bit more about the difference between short term losses and long term losses, and why it's preferable to harvest one and not the other? Thanks. So much to learn....

(I have no doubt it's covered but from what I've read in our wiki materials and this forum, it's not explained clearly. I'm probably missing it, of course.)
As someone tried to explain to me... it has to do with the Sch D loss netting rules. (Had to go find my notes.)

Netting rules for ST and LT capital gains.
  • 1. Net short-term gains (in full) and losses
    2. Net long-term gains (in full) and losses.
    3. Net any short-term losses against long-term gains.
    If result is negative, can use $3000 to offset current year income.
    Any excess is carried forward as long-term loss.
http://www.smartmoney.com/tax/capital/i ... ttingrules

Notice.
--ST gains are taxed most, so ST losses netted against them provide the most tax advantage.
--LT gains are taxed least, so LT losses netted against them provide the least tax advantage, and are wasted when they offset LTCGs instead of ordinary income.

Hence the general rules:
--Take losses when they are ST.
--Don't harvest LTCG when you have a (treated as LT) loss carry over.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by newlawyer » Sun Oct 04, 2015 7:00 pm

I'd like to TLH shares of VTSAX. The last time I bought VTSAX was 8/24/15. However, I "received" a dividend on 9/24/15. But before I received this last dividend, I had changed my settings from reinvest to buy shares of another fund (VTIAX). So, I still haven't purchased any more VTSAX since 8/24/15. If I TLH VTSAX this week, will I still be good under the wash sale rules, i.e. the dividend on 9/24/15 will not otherwise count as me acquiring more VTSAX within the prior 30 days?

I would think so, but often logic alone is not sufficient in understanding our wash sale rules!

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by subham » Tue Oct 13, 2015 12:32 pm

livesoft

i am still going through the long threads but I looked at my VTIAX losses and 2/3rd of them are long term losses. I also wont have any capital gains to offset this year.

should i still harvest the losses (~8% drop)?

also there is one automatic dividend reinvestment lot on 9/24. Should i hold off TLHing all other lots till 10/25 or should i do it anyway now if i wanted to? If i did it now, will the entire exchange be considered wash sale or only the small portion from the dividend reinvestment?

Thanks

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by livesoft » Tue Oct 13, 2015 12:43 pm

subham wrote:livesoft

i am still going through the long threads but I looked at my VTIAX losses and 2/3rd of them are long term losses. I also wont have any capital gains to offset this year.

should i still harvest the losses (~8% drop)?

also there is one automatic dividend reinvestment lot on 9/24. Should i hold off TLHing all other lots till 10/25 or should i do it anyway now if i wanted to? If i did it now, will the entire exchange be considered wash sale or only the small portion from the dividend reinvestment?

Thanks
I would harvest an 8% loss if it was more than $500.

If you create a wash sale, it would only be small portion from the dividend reinvestment.

I do not think I would hold off myself for the 8% loss. If the shares on 9/24 have loss, I would sell them the day before I sold the other shares. That way, I don't think there would not be a wash sale.
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indexvahana
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by indexvahana » Wed Oct 14, 2015 8:47 am

Question regarding TLH.
I have 2 positions in Mutual fund A.
- Position 1 was purchased 5 years ago and has unrealized losses.
- Position 2 was purchased today.

Question : What is the earliest I can sell position 1 and harvest the losses without a wash sale ?

Thanks.

ved
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by ved » Wed Oct 14, 2015 9:46 am

indexvahana wrote:Question regarding TLH.
I have 2 positions in Mutual fund A.
- Position 1 was purchased 5 years ago and has unrealized losses.
- Position 2 was purchased today.

Question : What is the earliest I can sell position 1 and harvest the losses without a wash sale ?
You have a couple of options:

Option 1: Sell Position 2, and then sell Position 1 the day after. That way you do not have any "replacement" shares for the Position 1 shares that you want to TLH. I guess you can sell Position 2 and Position 1 at the same time also. The issue with this is that you may have gains from Position 2 that you would have to pay tax on ST cap gains.

Option 2: Wait for 30 days from today (from the day Position 2 was purchased), then sell Position 1 and/or Position 2 depending on the unrealized losses then. Issue with this is that you don't know how the market behaves in the next 30 days - you may lose the opportunity to TLH.

For both these options, the assumption are that:
1. you do not have any other purchases of this Mutual Fund (or a substantially identical MF) in the last 30 days.
2. you are not going to buy the MF A (or a substantially identical MF) in the next 30 days.
3. you are going to purchase another MF (that is not substantially identical) to remain in the market.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by subham » Wed Oct 14, 2015 11:48 am

Sorry to hijack, but what happens if I sold both Position1 and Position2 the same day? Position2 for me is a small dividend reinvestment with almost negligible gain. I dont want to wait till tomorrow for TLHing Position1 as the market has dropped even more today and would like to lock it.
ved wrote:
indexvahana wrote:Question regarding TLH.
I have 2 positions in Mutual fund A.
- Position 1 was purchased 5 years ago and has unrealized losses.
- Position 2 was purchased today.

Question : What is the earliest I can sell position 1 and harvest the losses without a wash sale ?
You have a couple of options:

Option 1: Sell Position 2, and then sell Position 1 the day after. That way you do not have any "replacement" shares for the Position 1 shares that you want to TLH. I guess you can sell Position 2 and Position 1 at the same time also. The issue with this is that you may have gains from Position 2 that you would have to pay tax on ST cap gains.

Option 2: Wait for 30 days from today (from the day Position 2 was purchased), then sell Position 1 and/or Position 2 depending on the unrealized losses then. Issue with this is that you don't know how the market behaves in the next 30 days - you may lose the opportunity to TLH.

For both these options, the assumption are that:
1. you do not have any other purchases of this Mutual Fund (or a substantially identical MF) in the last 30 days.
2. you are not going to buy the MF A (or a substantially identical MF) in the next 30 days.
3. you are going to purchase another MF (that is not substantially identical) to remain in the market.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by ved » Wed Oct 14, 2015 12:01 pm

I think as long as you sell all of Position 2, along with the shares from Position 1 that you want to TLH, you should be ok.
Folks much smarter than me should confirm this.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by retiredjg » Wed Oct 14, 2015 12:19 pm

It seems the problem is that position 2 was bought today. Since it is a mutual fund the actual buying will not happen till after close of business - so you might not be able to sell position 2 today.

A wash sale is not illegal, but you do lose some benefit from your harvested loss. There is a way to make it all right but I've never been able to understand it.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by livesoft » Wed Oct 14, 2015 12:35 pm

subham wrote:Sorry to hijack, but what happens if I sold both Position1 and Position2 the same day? Position2 for me is a small dividend reinvestment with almost negligible gain. I dont want to wait till tomorrow for TLHing Position1 as the market has dropped even more today and would like to lock it.
What happens probably depends on your broker, but I'll give it try.

1. You sell both positions, but your broker accounting software makes it look like you sell Position1 first. So that means that there is a wash sale because of position 2 which is sold second.

2. Your broker disallows the loss of a little bit of the position 1 shares and adds that loss to the basis of the position 2 shares.

3. Your broker sells position 2 shares (on the same day) and since the basis is more than what you paid for the shares, then the realized gain or loss will be slightly different than what you expected, but the difference is exactly the disallowed loss of your position 1. That is, you get to book the loss that was disallowed anyways.

4. Next year, you get a 1099-B that has to be transferred to your tax return. You will have to note the wash sale on the line where the sale of position 1 is reported. I do not know how brokers would report this, but I know that I would put a W in the correct place and make sure the sale proceeds accounted for the disallowed loss. That is, the sales proceeds would be higher by the disallowed loss. On another line, I would put the sale of position 2, but the cost basis would be adjusted higher by the disallowed loss of the previous line.

5. The sum of cost basis would be as if there was no wash sale. The sum of the sales proceed would be as if there were no wash sale.

6. The question arises "Can I just put one line on my tax return with the correct sums and not worry about reporting the wash sale?" My answer would be "Probably.", but it would depend on what was reported on the 1099-B and that will depend on what your broker does. In the wash sale that I had, it was not reported on my 1099-B. I guess we should have somebody show us a 1099-B with a broker-designated wash sale on it and also how it shows up in tax software after downloading the 1099-B into tax software.

In any event, it appears to be no more complicated than paying your credit card bill on which you returned something you bought. The charge for buying the item will be on one line of your bill and the credit for returning it will be on another line of your bill, but the total amount of the bill will be the same as if neither the item's purchase nor return and credit occurred.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by subham » Wed Oct 14, 2015 1:44 pm

Thanks for detailed response. Last year when i was DCing some Bond funds into Stock, i may have triggered wash sales and VG included "W" in the 1099. So I guess it should be all automatic when the time to files taxes.

I just exchanged all my VTIAX to VWFAX today and harvest 10% losses. Will have to keep an eye on how the losses will be used in tax return and how they will be carried over. Hopefully all of that is automatic as well with Turbotax.
livesoft wrote:
subham wrote:Sorry to hijack, but what happens if I sold both Position1 and Position2 the same day? Position2 for me is a small dividend reinvestment with almost negligible gain. I dont want to wait till tomorrow for TLHing Position1 as the market has dropped even more today and would like to lock it.
What happens probably depends on your broker, but I'll give it try.

1. You sell both positions, but your broker accounting software makes it look like you sell Position1 first. So that means that there is a wash sale because of position 2 which is sold second.

2. Your broker disallows the loss of a little bit of the position 1 shares and adds that loss to the basis of the position 2 shares.

3. Your broker sells position 2 shares (on the same day) and since the basis is more than what you paid for the shares, then the realized gain or loss will be slightly different than what you expected, but the difference is exactly the disallowed loss of your position 1. That is, you get to book the loss that was disallowed anyways.

4. Next year, you get a 1099-B that has to be transferred to your tax return. You will have to note the wash sale on the line where the sale of position 1 is reported. I do not know how brokers would report this, but I know that I would put a W in the correct place and make sure the sale proceeds accounted for the disallowed loss. That is, the sales proceeds would be higher by the disallowed loss. On another line, I would put the sale of position 2, but the cost basis would be adjusted higher by the disallowed loss of the previous line.

5. The sum of cost basis would be as if there was no wash sale. The sum of the sales proceed would be as if there were no wash sale.

6. The question arises "Can I just put one line on my tax return with the correct sums and not worry about reporting the wash sale?" My answer would be "Probably.", but it would depend on what was reported on the 1099-B and that will depend on what your broker does. In the wash sale that I had, it was not reported on my 1099-B. I guess we should have somebody show us a 1099-B with a broker-designated wash sale on it and also how it shows up in tax software after downloading the 1099-B into tax software.

In any event, it appears to be no more complicated than paying your credit card bill on which you returned something you bought. The charge for buying the item will be on one line of your bill and the credit for returning it will be on another line of your bill, but the total amount of the bill will be the same as if neither the item's purchase nor return and credit occurred.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by LadyGeek » Fri Nov 27, 2015 8:56 pm

A draft wiki page was started in August. Is it worthwhile to continue development?

See: User:LadyGeek/Tax loss harvesting for beginners

There's already link to this thread from Tax loss harvesting ("External links"), so I'm not sure how much a dedicated page would help.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Roothy » Fri Dec 11, 2015 11:37 am

I have no strong opinion on whether a dedicated page would help, but my weak opinion is "yes, it would help." I personally found the main TLH page too complicated for me--a rank beginner.

And while we're on the subject of being a rank beginner... livesoft had a theory about Thanksgiving and harvesting losses that I confess I still don't understand. It is now past Thanksgiving. I have some losses (a bit over $1000) I could harvest today, and am thinking of doing it. Livesoft, if you are reading this, could you explain your end-of-the-year theory? Is it close enough to the end of the year that I should do this, or should I be waiting until the last couple of days of the year?

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by livesoft » Fri Dec 11, 2015 12:15 pm

There was no theory about Thanksgiving. It was a practical tip. Thanksgiving is near the end the year and a long week-end so that you can do all your year-end tax planning and portfolio clean-up and management. One should make plans and that includes when to execute them.

As for TLH timing here, it is not a topic for dummies. What one decides to do will depend on one's own personal situation.

Here is what grabiner wrote about switching funds near distribution dates: viewtopic.php?p=2715677#p2715677

Here is what I posted about being able to go back to one's original positions before year-end (hint: too late now): viewtopic.php?t=178587

Have you considered whether the amounts of dividends and whether your actions will make them non-qualified or not are a concern for you and your taxes? See these threads for some possible cleverness:
viewtopic.php?t=174279
viewtopic.php?t=152687
viewtopic.php?t=154907

If you are person who analyses everything and crosses all your t's and dots all your i's, then you will probably be paralyzed into inaction. And even that won't be a big deal.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by fortyofforty » Fri Dec 11, 2015 5:46 pm

I recently used losses in one fund to switch to a similar fund that I actually preferred. It's not strictly TLH, but all shares were sold at a loss so I was able to move everything over. As livesoft said, it's a good time to clean up your portfolio and tie up any loose ends. The only wrinkle was that I had to change from "reinvest" dividends to receive them into the settlement fund. I won't be TLH'ing this fund in the future, I don't imagine, but I'm slightly happier in that fund than the old one I was in.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by subham » Mon Dec 14, 2015 3:59 pm

Livesoft and other TLH experts:

I TLHd all my VTIAX into VWFAX back in 10/14/2015 to harvest ~9% loss. Later on 10/30 and 11/10 I bought some more VWFAX as part of rebalancing.

Today I see VWFAX has fallen further and I see a chance for another round of TLH, so could I go ahead and replace it with VTIAX again given that its more than 31 days since last transaction on 11/10? Or should i just wait to do this warly next year to spread out the losses?

Thanks

subham wrote:Thanks for detailed response. Last year when i was DCing some Bond funds into Stock, i may have triggered wash sales and VG included "W" in the 1099. So I guess it should be all automatic when the time to files taxes.

I just exchanged all my VTIAX to VWFAX today and harvest 10% losses. Will have to keep an eye on how the losses will be used in tax return and how they will be carried over. Hopefully all of that is automatic as well with Turbotax.
livesoft wrote:
subham wrote:Sorry to hijack, but what happens if I sold both Position1 and Position2 the same day? Position2 for me is a small dividend reinvestment with almost negligible gain. I dont want to wait till tomorrow for TLHing Position1 as the market has dropped even more today and would like to lock it.
What happens probably depends on your broker, but I'll give it try.

1. You sell both positions, but your broker accounting software makes it look like you sell Position1 first. So that means that there is a wash sale because of position 2 which is sold second.

2. Your broker disallows the loss of a little bit of the position 1 shares and adds that loss to the basis of the position 2 shares.

3. Your broker sells position 2 shares (on the same day) and since the basis is more than what you paid for the shares, then the realized gain or loss will be slightly different than what you expected, but the difference is exactly the disallowed loss of your position 1. That is, you get to book the loss that was disallowed anyways.

4. Next year, you get a 1099-B that has to be transferred to your tax return. You will have to note the wash sale on the line where the sale of position 1 is reported. I do not know how brokers would report this, but I know that I would put a W in the correct place and make sure the sale proceeds accounted for the disallowed loss. That is, the sales proceeds would be higher by the disallowed loss. On another line, I would put the sale of position 2, but the cost basis would be adjusted higher by the disallowed loss of the previous line.

5. The sum of cost basis would be as if there was no wash sale. The sum of the sales proceed would be as if there were no wash sale.

6. The question arises "Can I just put one line on my tax return with the correct sums and not worry about reporting the wash sale?" My answer would be "Probably.", but it would depend on what was reported on the 1099-B and that will depend on what your broker does. In the wash sale that I had, it was not reported on my 1099-B. I guess we should have somebody show us a 1099-B with a broker-designated wash sale on it and also how it shows up in tax software after downloading the 1099-B into tax software.

In any event, it appears to be no more complicated than paying your credit card bill on which you returned something you bought. The charge for buying the item will be on one line of your bill and the credit for returning it will be on another line of your bill, but the total amount of the bill will be the same as if neither the item's purchase nor return and credit occurred.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by livesoft » Mon Dec 14, 2015 4:02 pm

I would exchange VFWAX into VTIAX this week if I had losses in VFWAX. There is no need to spread out the losses, plus you will be getting back into the fund I think you prefer to be in.

I am doing a TLH wash-sale experiment as shown in this thread: -> Real-life, real-time wash sale & TLH documented
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by subham » Mon Dec 14, 2015 4:10 pm

livesoft wrote:I would exchange VFWAX into VTIAX this week if I had losses in VFWAX. There is no need to spread out the losses, plus you will be getting back into the fund I think you prefer to be in.

I am doing a TLH wash-sale experiment as shown in this thread: -> Real-life, real-time wash sale & TLH documented
thanks for rapid response! What is special about this week? Do i have to do it this week only and not procrastinate till next or week after next?

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by livesoft » Mon Dec 14, 2015 5:01 pm

What is special this week is that VTIAX and VFWAX will pay a distribution (record date is 12/17). There are some nuances about holding periods of shares that pay dividends that will affect your taxes. See, e.g., viewtopic.php?t=174279

If you are going to hold VTIAX for more than 60 days after purchasing, then I would let VTIAX get the distribution instead of VFWAX. Similarly, if you are not going to hold shares of VFWAX for more than 61 days (before/after the dividend), then I would not let VFWAX get the dividend. Since you last purchased shares on 11/10, then you need to count 61 days from 11/10 I think. Hence, selling VFWAX before its record date is probably better.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by subham » Mon Dec 14, 2015 5:23 pm

livesoft wrote:What is special this week is that VTIAX and VFWAX will pay a distribution (record date is 12/17). There are some nuances about holding periods of shares that pay dividends that will affect your taxes. See, e.g., viewtopic.php?t=174279

If you are going to hold VTIAX for more than 60 days after purchasing, then I would let VTIAX get the distribution instead of VFWAX. Similarly, if you are not going to hold shares of VFWAX for more than 61 days (before/after the dividend), then I would not let VFWAX get the dividend. Since you last purchased shares on 11/10, then you need to count 61 days from 11/10 I think. Hence, selling VFWAX before its record date is probably better.
Cool thanks, made the full switch back from VFWAX to VTIAX and i will hold off any move back for 61 days or until after Feb 14.

Next year taxes will be interesting.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Makaveli » Mon Jan 18, 2016 7:14 pm

Great stuff all, referencing this as I type this post. Earmarked for the future.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by ERISA Stone » Fri Jan 22, 2016 3:28 pm

I am a TLH newbie as well and I think I missed one important distinction. I didn't realize wash sales could happen on purchases before the sale.

In my taxable account, I did the following:

Purchased 971 shs of VTI in July 2014
Purchased 11 shs of VTI on 1/5/2016
Sold 982 shs of VTI on 1/15/2016 for a loss
Bought ITOT with the proceeds and currently still have

Wife Roth

Purchased $6608.08 worth of VTI on 12/31/2015

Wife 401k

Purchased 101 shs of VTI for $10,337 on 1/4/2016

My 401k

Purchased 97 shs of VTI for $9,603 on 1/7/2016

Depending on one's view, at a minimum the purchase in the wife's Roth account is a wash sale, if I'm reading correctly. If so, does that mean I would reduce my "loss" by the value purchased on 12/31/2015? Or do I lose the entire TLH for the sale in my taxable on 1/15/2016?

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by livesoft » Fri Jan 22, 2016 4:24 pm

You definitely have a partial wash sale from the shares purchased in the Roth. The loss in the taxable account from the same number of shares that were purchased in the Roth is disallowed permanently. The IRS has pretty good instructions on how to do the calculation in Publication 550.

I would not worry about the 401(k)s. If you become a test case for the IRS, please let us know. :)
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by ERISA Stone » Fri Jan 22, 2016 4:57 pm

livesoft wrote:You definitely have a partial wash sale from the shares purchased in the Roth. The loss in the taxable account from the same number of shares that were purchased in the Roth is disallowed permanently. The IRS has pretty good instructions on how to do the calculation in Publication 550.

I would not worry about the 401(k)s. If you become a test case for the IRS, please let us know. :)
Thanks for the help. I'll take a look at the 550.

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by fortyofforty » Fri Jan 22, 2016 6:43 pm

The whole "even count purchases and sales in your IRAs" thing almost got me this year. Almost. I've got to wait a bit longer to TLH, to avoid getting caught in the wash.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by ERISA Stone » Wed Jan 27, 2016 1:15 pm

ERISA Stone wrote:I am a TLH newbie as well and I think I missed one important distinction. I didn't realize wash sales could happen on purchases before the sale.

In my taxable account, I did the following:

Purchased 971 shs of VTI in July 2014
Purchased 11 shs of VTI on 1/5/2016
Sold 982 shs of VTI on 1/15/2016 for a loss
Bought ITOT with the proceeds and currently still have

Wife Roth

Purchased $6608.08 worth of VTI on 12/31/2015

Wife 401k

Purchased 101 shs of VTI for $10,337 on 1/4/2016

My 401k

Purchased 97 shs of VTI for $9,603 on 1/7/2016

Depending on one's view, at a minimum the purchase in the wife's Roth account is a wash sale, if I'm reading correctly. If so, does that mean I would reduce my "loss" by the value purchased on 12/31/2015? Or do I lose the entire TLH for the sale in my taxable on 1/15/2016?
If the transactions above are the only ones I have performed for VTI, I should be able to sell more that I bought in July 2014 and there is no need to worry about a wash if I buy ITOT, correct?

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Pirogue » Wed Jan 27, 2016 5:19 pm

shheeewww this is confusing...maybe one day :oops:

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Barefootgirl » Sun Nov 06, 2016 9:26 am

shheeewww this is confusing...maybe one day :oops:
Yes, could be me but I am looking for the real absolute dummies version....
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by LadyGeek » Sun Nov 06, 2016 10:06 am

^^^ Here's what's going on:

- You pay taxes if you make a profit selling stock.
- If you take a loss (sell for less than you paid for the stock), you're allowed to use the loss as a "credit" against the profit.
- The result is you don't have to pay as much taxes because the loss offsets the gains.
- You're only allowed to take a maximum of $3,000 "credit".

Of course, you don't want to get into this situation in the first place. However, if you do, there's an entire strategy on how to take advantage of the situation.

Hence the wiki article: Tax loss harvesting

You are making the best of a bad situation, hence "harvesting" what you can from this mess.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by island » Sun Nov 06, 2016 12:46 pm

LadyGeek wrote:^^^ Here's what's going on:

- You pay taxes if you make a profit selling stock.
- If you take a loss (sell for less than you paid for the stock), you're allowed to use the loss as a "credit" against the profit.
- The result is you don't have to pay as much taxes because the loss offsets the gains.
- You're only allowed to take a maximum of $3,000 "credit".

Of course, you don't want to get into this situation in the first place. However, if you do, there's an entire strategy on how to take advantage of the situation.

Hence the wiki article: Tax loss harvesting

You are making the best of a bad situation, hence "harvesting" what you can from this mess.

I TLH for the first time this year. Had the opportunity to reduce the amount held in American Funds purchased in the 90's before I knew anything, including the ability to TLH. Sold at least 120 individual lots across 6 funds. Kept great records, but none covered shares because purchased so long ago. So I was on my own figuring out basis and I did. However....

I understand the process up to that point, but what I'm worried about is will I be able to figure out how to get that info into Turbo Tax correctly come tax time. Will it require I record for each fund separately or lump it all together, or ???

What should I be doing now to learn and prepare for that? What tax forms, schedules, specific lines and other things should I focus on? Any suggestions?

Thanks

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by livesoft » Sun Nov 06, 2016 12:56 pm

island wrote:What should I be doing now to learn and prepare for that? What tax forms, schedules, specific lines and other things should I focus on? Any suggestions?

Thanks
I posted an entire thread about this: Tax-loss harvesting documented with screen captures and tax returns. Please note how the IRS allows for the word "various" for Date acquired on your tax return and how it was used in my tax return as shown in the thread in a screen capture of my tax return.
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by island » Sun Nov 06, 2016 5:56 pm

livesoft wrote:
island wrote:What should I be doing now to learn and prepare for that? What tax forms, schedules, specific lines and other things should I focus on? Any suggestions?

Thanks
I posted an entire thread about this: Tax-loss harvesting documented with screen captures and tax returns. Please note how the IRS allows for the word "various" for Date acquired on your tax return and how it was used in my tax return as shown in the thread in a screen capture of my tax return.
Oh wow, thank you so much! Will check it out and bookmark.

There should be an entry in the Wiki listing all your TLH threads.

Also, you should write a book. When I search online most websites or books give very simple examples, one or two sales at a loss. Never what to do when many individual lots, best way to keep track of TLH or what it looks like on a return. At least not that I've found.

So thanks again for this and all your contributions! :D

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by boglephreak » Mon Nov 14, 2016 2:37 pm

i started investing in a taxable account in April 2016. primarily, VTIAX. it is currently down, so i am excited about the prospects of TLH for the first time (weird to be excited when i lost money, but ignore that). so, i read this entire thread before doing anything just to make sure i knew what was happening. i thought it was for sure a TLH moment, but then i got to livesoft's flow chart, and apparently it is borderline.
livesoft wrote:For all the shares with a lower price, what percentage is the sum of the loss compared to the value of those shares?

Less than 3%? -
Yes. Have you owned these shares less than 11 months?
Yes. Is it before Thanksgiving? -
Yes. Stop here. It may be better to wait to TLH these shares.
No, continue below
my question is what is the significance of these questions?

the loss/share value is about 3.03% (the loss is about $2000 in total). I have owned the shares substantially less than 11 months (some less than month). it is before thanksgiving.

not sure if it is significant but i am in a high tax bracket (>30%).

also, just wanted to thank the op, livesoft and other contributors. this is a great thread for a beginner.

edit: just realized i was looking at losses from last week. with the continued drop today, i will be higher than 3.03%, so not borderline most likely. still curious about the basis for the flowchart though. thanks!

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by mrtimo » Tue Feb 07, 2017 11:37 pm

Has anyone made a tool (fancy spreadsheet) or an app to help people recognize when it is a good time to TLH with some of the common low fee vanguard funds?

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by House Blend » Wed Feb 08, 2017 11:23 am

mrtimo wrote:Has anyone made a tool (fancy spreadsheet) or an app to help people recognize when it is a good time to TLH with some of the common low fee vanguard funds?
Welcome to the forum.

What's wrong with using your Vanguard account?

Log in, navigate to the cost basis page, and click on the details for your favorite Vanguard fund. Even if you are red/green color blind, you should have no trouble seeing which lots have gains and losses and judging whether the amounts at stake are TLH-worthy.

This does assume that you've elected Specific ID for cost basis tracking, but that should go without saying, since you've read the previous 245 posts in this thread. In any case, electing Specific ID is Job #1 for any TLH newbie.

If you are willing to maintain your own records of purchases, there are some example spreadsheets in the wiki:
https://www.bogleheads.org/wiki/Using_a ... _portfolio

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by bbrock » Wed Feb 08, 2017 12:15 pm

+1 with regards to what House blend stated. Unfortunately, I still have to maintain a spreadsheet for all my old lots. It sure is nice to be able to see my basis on new lots at Vanguard.
bbrock

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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by Lieutenant.Columbo » Thu Feb 09, 2017 7:19 am

LadyGeek wrote:...If you take a loss (sell for less than you paid for the stock), you're allowed to use the loss as a "credit" against the profit...
does TLH get in the way of rebalancing?
When a fund is underperforming we're supposed to buy More of it, Not sell it, aren't we? :?
thanks
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by goingup » Thu Feb 09, 2017 9:51 am

Lieutenant.Columbo wrote:
LadyGeek wrote:...If you take a loss (sell for less than you paid for the stock), you're allowed to use the loss as a "credit" against the profit...
does TLH get in the way of rebalancing?
When a fund is underperforming we're supposed to buy More of it, Not sell it, aren't we? :?
thanks
No, TLH does not get in the way of rebalancing or purchasing more of the underperforming fund.

Last year I sold $100K of Fund A (FTSE ex US) to buy Fund B (Total Int.). Harvested $12K in losses. Added any new money to Fund A and hoped Fund B would slide enough to sell it, harvest loss, and repurchase Fund A.

So, the method is: Sell losing lots of Fund A and purchase Fund B, the tax loss partner. Continue to add to Fund A. Don't add to Fund B, and don't reinvest dividends. If Fund B tanks, sell all of it and repurchase Fund A. That is the theory. Today I sit with both Fund A & B because no compelling TLH opportunity came.

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