TLH for absolute dummies [Tax Loss Harvesting]

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

Post by livesoft » Thu Jul 04, 2019 9:02 pm

Yes, if you have no preference.

But if both funds have losses that does not mean you have sell both funds at the same time. You can sell Loss A and buy shares of Loss B. Then in 31 days (i.e. after 30 days) you can buy shares of Loss A after selling any shares of Loss B that still have a loss. There are many more possibilities. For example, suppose the two funds are US stocks. Sell both losing positions and buy Foreign Stocks. However, if US stocks have losses, then it is likely that foreign stocks have losses, too. But then wait 31 days and do the TLH of the foreign positions that still have losses.

One doesn't have to be precise in all the above, so do whatever is easiest.

Generally tax-loss harvesting happens rarely and with only small amounts. An exception is when someone invests a Lump Sum that drops and creates a big loss on all shares. Another exception is someone investment big portions in a DCA manner.
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House Blend
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by House Blend » Fri Jul 05, 2019 8:20 am

ma21n2 wrote:
Thu Jul 04, 2019 7:43 pm
House Blend wrote:
Thu Feb 09, 2017 3:55 pm
If you harvest a loss from A to similar-but-not-substantially-identical B, then it is possible, perhaps even likely, that you are underweight in the asset class X that A and B represent.

If you need more X, then for the next 31 days (counting the day of sale), limit your purchases of X to Fund B (or C, or D,...). Only after that should you consider buying more A.
I add money into my taxable brokerage account twice a month. If I sold Fund A at a loss and replaced it with Fund B, is there a good reason for buying Fund A instead of Fund B with my regular investments? I understand you shouldn’t buy Fund A for 30 days, but I don’t quite get why you’d start buying Fund A after 30 days.

My thinking is, as long as price keeps going up since TLH, I’d want to keep directing new money to Fund B, so when the market drops, I can sell Fund B shares and buy Fund A. (And then I’d keep buying Fund A with regular investments) Otherwise, I’m more likely to end up with losses in both Fund A and Fund B. Am I missing something? Thanks!
I agree that it makes sense to continue buying B (when you need more of that asset class) whether or not 31 days have passed.

As you say, if the price rises after the A -> B harvest, then all of your highest cost shares will be concentrated in Fund B. This will be useful for when the next TLH opportunity arises.

If the price continues to drop after the A -> B harvest, then depending on what your tax lots of A look like, you may have additional A -> B harvest opportunities. But you are certain to have losses in B. The worst that could happen is that you could end up in a situation where the biggest or only losses available are in B and can't be harvested immediately unless you introduce Fund C.

However, this last dilemma is largely independent of whether you buy more B or more A after the wash sale window has expired. For example, say your last A -> B harvest involved shares of B at $100 each. The wash sale window has expired. If the price of B is now $110 and you are buying, you should buy B. If the price of B is $90, then you have harvestable losses. Possibly also in A. Check to see which one has the biggest losses; that will determine what you will be buying with your next purchase.

I'm comfortable with using just two funds per asset class, and accept having to postpone taking losses occasionally. Yes, losses can evaporate in less than 31 days, but that's a problem I don't mind having.

FIby45
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by FIby45 » Wed Nov 06, 2019 8:15 am

New to tlh.

I'm seeing in the thread people are tlh in August. Why wouldn't people be waiting to closer to the end of the year- especially if it is indices they are buying/selling?

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

Post by retiredjg » Wed Nov 06, 2019 8:49 am

FIby45 wrote:
Wed Nov 06, 2019 8:15 am
New to tlh.

I'm seeing in the thread people are tlh in August. Why wouldn't people be waiting to closer to the end of the year- especially if it is indices they are buying/selling?
Tax loss harvesting is done when there are losses. There may not be any losses if you wait till the end of the year.

FIby45
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by FIby45 » Wed Nov 06, 2019 9:16 am

retiredjg wrote:
Wed Nov 06, 2019 8:49 am
FIby45 wrote:
Wed Nov 06, 2019 8:15 am
New to tlh.

I'm seeing in the thread people are tlh in August. Why wouldn't people be waiting to closer to the end of the year- especially if it is indices they are buying/selling?
Tax loss harvesting is done when there are losses. There may not be any losses if you wait till the end of the year.
My wife and I have a small percentage of play money we invest in individual stocks. We want to dump those and just be 100% indexes for equities. (Yes, I know we should never have been playing w individual stocks in the first place but it's less than 5% NW.

About $5000 in long term gains from individual.stocks, and $8500 in short term losses. We are in highest state/fed brackets. I also could recognize a $5500 short term index (iemg) gain to offset if I want, but I would imagine it may make sense to just keep iemg and carry loss forward for income tax deduction in future years, and hold iemg?

This may need too complicated for posting here and need its own thread.

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

Post by retiredjg » Wed Nov 06, 2019 9:36 am

FIby45 wrote:
Wed Nov 06, 2019 8:15 am
About $5000 in long term gains from individual.stocks, and $8500 in short term losses. We are in highest state/fed brackets.
If you wish to get rid of the individual stocks, this is a good way to do that without a tax hit.

If you sell all the stocks you will have some extra losses (about $3500) which you could use to offset ordinary income. I think the limit is $3k a year so you would have a little bit to carry over to the next year.

ivk5
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Re: TLH for absolute dummies [Tax Loss Harvesting]

Post by ivk5 » Wed Nov 06, 2019 9:44 am

retiredjg wrote:
Wed Nov 06, 2019 9:36 am
FIby45 wrote:
Wed Nov 06, 2019 8:15 am
About $5000 in long term gains from individual.stocks, and $8500 in short term losses. We are in highest state/fed brackets.
If you wish to get rid of the individual stocks, this is a good way to do that without a tax hit.

If you sell all the stocks you will have some extra losses (about $3500) which you could use to offset ordinary income. I think the limit is $3k a year so you would have a little bit to carry over to the next year.
+1 and to be explicit, I would not recommend the tax gain harvesting you also asked about (unless you're going to pay 0% on capital gains, which is clearly not the case from context).

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