How much of a dip do you want before you TLH?

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Hulk
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How much of a dip do you want before you TLH?

Post by Hulk » Tue Oct 16, 2018 9:06 am

TLHed for the first time last week. Thanks to all on this website who have contributed to my education on this.

Glad I am able to do it and save money on my taxes, but I have realized it is making my lazy 3 fund portfolio less simple. Worth it, but less simple. Lets say the stock market drops again this week and I TLH again. My porfolio gets even more complicated with another round of TLHing.

Do you guys have a threshold at which you feel the TLH tax savings is worth the added complexity. If an asset class drops 7 days in a row, are you TLHing 7 times? Curious if you guys have a conscious or subconscious % drop or $ drop above which you bite and TLH and below which you you say, ehh, and dont bother.

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Re: How much of a dip do you want before you TLH?

Post by 2015 » Tue Oct 16, 2018 9:11 am

TLH is probably the only exception I'll make to adding a bit of complexity to my financial picture. Currently, it's because I'm in (desperate) need of losses to offset gains. As such, I intend for the time being to take advantage of any dip where I can TLH. It's one of the very few times I can see complexity benefiting better than simplicity (unless of course, I screw up the TLH!).

ccf
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Re: How much of a dip do you want before you TLH?

Post by ccf » Tue Oct 16, 2018 9:16 am

I set a $ amount (I do it when I can harvest a $5000 loss from a single fund) but I'll go lower if a short term loss is close to becoming a long term loss or if the year is almost over.

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Re: How much of a dip do you want before you TLH?

Post by The Wizard » Tue Oct 16, 2018 9:17 am

You'll need more than two TLH partner funds if you do it several times per month.
So that could make it messier...
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Re: How much of a dip do you want before you TLH?

Post by mhc » Tue Oct 16, 2018 9:18 am

I usually will not TLH unless it is more than $3-5K in a single fund.

Having extra funds adds so little complexity, that I do not worry about it. I have a few in my account. I think since I switched to the brokerage account at Vanguard, I'll get a consolidated 1099, so I'm expecting the number of funds to have no impact on the time it takes to fill out my tax forms.

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Re: How much of a dip do you want before you TLH?

Post by The Wizard » Tue Oct 16, 2018 9:19 am

ccf wrote:
Tue Oct 16, 2018 9:16 am
I set a $ amount (I do it when I can harvest a $5000 loss from a single fund) but I'll go lower if a short term loss is close to becoming a long term loss or if the year is almost over.
What's the advantage of a short term loss vs a long term loss?
That it can be used to counter short term gains?
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ccf
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Re: How much of a dip do you want before you TLH?

Post by ccf » Tue Oct 16, 2018 9:25 am

The Wizard wrote:
Tue Oct 16, 2018 9:19 am
What's the advantage of a short term loss vs a long term loss?
That it can be used to counter short term gains?
Losses offset gains of the same type first before they can be applied the other type, so if you have both short term gains and long term gains, the short term losses are more valuable.

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Re: How much of a dip do you want before you TLH?

Post by michaeljc70 » Tue Oct 16, 2018 9:47 am

I'm surprised how much talk there is of TLH after a 9 year bull market. The market is only down a few percent. On top of that, most of my money is in tax deferred accounts. I actually did gain "harvesting" last year at 0% as my income was low. You are really just shifting the timing, so if I were to do TLH it would be based more on my income (when the loss helps me more) rather than just trying to grab every loss I can. But my income varies more from year to year than most people.

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Re: How much of a dip do you want before you TLH?

Post by livesoft » Tue Oct 16, 2018 10:03 am

To answer the question, I have written that the amount of loss that I TLH depends on a number of factors and not necessarily how much of a dip happens:

1. At least $300 to $500, but could be more or could be less.

2. Almost every loss before the loss becomes long-term, so any loss when a position has been held 11 months or 51 weeks, gets sold and realized

3. Almost every loss that is still around in the last week of December gets sold. I want to look at my lists of positions and see only black and no red on January 1st of each year.

4. If I feel the loss is not going away for a while, then I may be in no hurry.

5. Do you see how there are no hard and fast rules?

6. The reality is that since I am retired, I haven't bought any shares in any taxable account in a while (I use dividends to pay living expenses), that only a huge market loss would create any losses.


But I object to the idea that it adds complexity. Very few people have a single account for anything. One usually has more than one credit card, but I never see any comments about too much credit card complexity and all those CDs and savings accounts that people seem to discuss having.

Of course, if one has a chance to sell a position without creating taxes and without paying a commission, then I see no reason to not do that.

Back in April 2009, I TLH'd from IJS to VBR. That position in VBR has sat untouched since April 2009. The dividends go to my checking account and get used every which way except the dividends have never been used to buy more shares of VBR in that taxable account.
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Re: How much of a dip do you want before you TLH?

Post by livesoft » Tue Oct 16, 2018 10:05 am

michaeljc70 wrote:
Tue Oct 16, 2018 9:47 am
I'm surprised how much talk there is of TLH after a 9 year bull market.
I am not surprised. There is always a subset of people who have just made a change to their portfolio or just invested a windfall. They have very short-term, recently purchased positions.

And next year, there will probably be a different subset of people/portfolios that will have losses.
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Re: How much of a dip do you want before you TLH?

Post by fujiters » Tue Oct 16, 2018 10:18 am

michaeljc70 wrote:
Tue Oct 16, 2018 9:47 am
I'm surprised how much talk there is of TLH after a 9 year bull market. The market is only down a few percent. On top of that, most of my money is in tax deferred accounts. I actually did gain "harvesting" last year at 0% as my income was low. You are really just shifting the timing, so if I were to do TLH it would be based more on my income (when the loss helps me more) rather than just trying to grab every loss I can. But my income varies more from year to year than most people.
I have international in my taxable account... I've been harvesting losses all year.
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Re: How much of a dip do you want before you TLH?

Post by Hulk » Tue Oct 16, 2018 10:24 am

ccf wrote:
Tue Oct 16, 2018 9:25 am
The Wizard wrote:
Tue Oct 16, 2018 9:19 am
What's the advantage of a short term loss vs a long term loss?
That it can be used to counter short term gains?
Losses offset gains of the same type first before they can be applied the other type, so if you have both short term gains and long term gains, the short term losses are more valuable.
Only if you intend to realize those gains though, right? You are in retirement and living off, in part, short term gains?

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Re: How much of a dip do you want before you TLH?

Post by michaeljc70 » Tue Oct 16, 2018 10:28 am

fujiters wrote:
Tue Oct 16, 2018 10:18 am
michaeljc70 wrote:
Tue Oct 16, 2018 9:47 am
I'm surprised how much talk there is of TLH after a 9 year bull market. The market is only down a few percent. On top of that, most of my money is in tax deferred accounts. I actually did gain "harvesting" last year at 0% as my income was low. You are really just shifting the timing, so if I were to do TLH it would be based more on my income (when the loss helps me more) rather than just trying to grab every loss I can. But my income varies more from year to year than most people.
I have international in my taxable account... I've been harvesting losses all year.
Good point on the international. My international is in a tax deferred account though.

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Re: How much of a dip do you want before you TLH?

Post by grabiner » Thu Oct 18, 2018 10:35 pm

I usually wait for about a 10% loss before harvesting. Part of my reason is that I have diminishing returns; I have huge carry-over losses, so it will be years before I get any additional benefit (and I might lose the benefit entirely if I sell the replacement shares for a capital gain). Another reason is that I have trading costs in both money and time in harvesting ETF losses, which is where most of my losses are.
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Re: How much of a dip do you want before you TLH?

Post by restingonmylaurels » Fri Oct 19, 2018 12:33 pm

ccf wrote:
Tue Oct 16, 2018 9:25 am
Losses offset gains of the same type first before they can be applied the other type, so if you have both short term gains and long term gains, the short term losses are more valuable.
I have often seen this statement or similar posted on BH and if I read my tax forms correctly, it should say "short term losses may be more valuable."

While standing on their own, short-term capital gains are taxed at ordinary incomes rates while long term capital gains are taxed at favored rates such as 0, 10%, 15%.

But Schedule D will combine the short and long term gains and losses into a single amount on line 16. This is then added to or offset against other taxable income via 1040 line 13.

For example, say a taxpayer has a short-term capital gain of $1000 and a long-term capital gain of $1000 and will TLH from a fund that has both short-term and long-term losses which they can specifically identify.

If the taxpayer wants to use $3000 of capital losses this year, should she use the short-term losses or the long-term losses to offset against the gains?

It should make no difference, as the line 7 net short-term gain or loss and the line 15 net long-term gain or loss will be combined to derive line 16.

So whether the short-term or long-term losses are used, line 16 will still show a loss of $1000 ($1000+$1000-$3000) that can be used to offset other taxable income.

In this case, short-term capital losses are no more valuable than long-term capital losses, they are equal. When line 16 is positive, then the short-term capital losses may more valuable, if there are short-term capital gains.

There are other issues like depreciation recapture that complicate this but as a simple rule, short term capital losses are more valuable when there is a net capital gain after combining both the net short term and net long term capital gains/losses but not if there is net capital loss.

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Re: How much of a dip do you want before you TLH?

Post by deltaneutral83 » Fri Oct 19, 2018 12:52 pm

michaeljc70 wrote:
Tue Oct 16, 2018 9:47 am
I'm surprised how much talk there is of TLH after a 9 year bull market. The market is only down a few percent.
International isn't in any 9 year bull market, that's for sure. People get things from older family members who've passed every day and invest it so anything put in international the past 18 months was pretty much ripe for harvesting last week. I harvested VXUS into IXUS in August, then back into VXUS in October. ETFs make it more complex (as opposed to MFs) as you don't want to get eaten up with bid/asks but it's not something I plan on doing a whole heck of a lot. But to your point, I know plenty who harvested all the way through March 2009 that will never see loss harvesting in those accounts again obviously. Some have started separate brokerage accounts along the way to give them that option rather than keeping it clean and in one taxable account. It's not a big deal to have VTI or VXUS at several different custodians (Fido/Schwab/TDA/Merrill/ etc etc) for many. Some of them tell me once they double their cost basis they pretty much leave it alone and go find some other brokerage slobbering over them with account opening benefits.

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Re: How much of a dip do you want before you TLH?

Post by ivk5 » Fri Oct 19, 2018 1:05 pm

restingonmylaurels wrote:
Fri Oct 19, 2018 12:33 pm
ccf wrote:
Tue Oct 16, 2018 9:25 am
Losses offset gains of the same type first before they can be applied the other type, so if you have both short term gains and long term gains, the short term losses are more valuable.
I have often seen this statement or similar posted on BH and if I read my tax forms correctly, it should say "short term losses may be more valuable."

While standing on their own, short-term capital gains are taxed at ordinary incomes rates while long term capital gains are taxed at favored rates such as 0, 10%, 15%.

But Schedule D will combine the short and long term gains and losses into a single amount on line 16. This is then added to or offset against other taxable income via 1040 line 13.

For example, say a taxpayer has a short-term capital gain of $1000 and a long-term capital gain of $1000 and will TLH from a fund that has both short-term and long-term losses which they can specifically identify.

If the taxpayer wants to use $3000 of capital losses this year, should she use the short-term losses or the long-term losses to offset against the gains?

It should make no difference, as the line 7 net short-term gain or loss and the line 15 net long-term gain or loss will be combined to derive line 16.

So whether the short-term or long-term losses are used, line 16 will still show a loss of $1000 ($1000+$1000-$3000) that can be used to offset other taxable income.

In this case, short-term capital losses are no more valuable than long-term capital losses, they are equal. When line 16 is positive, then the short-term capital losses may more valuable, if there are short-term capital gains.

There are other issues like depreciation recapture that complicate this but as a simple rule, short term capital losses are more valuable when there is a net capital gain after combining both the net short term and net long term capital gains/losses but not if there is net capital loss.
They are combined on line 16, but they are treated separately when calculating tax due (see worksheet) if, as you point out, there’s a net gain.

And you don’t get to choose which losses to offset which gains. It’s forced by the structure of the form, by design. You only get to choose what losses/gains to realize, and when.

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Re: How much of a dip do you want before you TLH?

Post by michaeljc70 » Fri Oct 19, 2018 1:39 pm

deltaneutral83 wrote:
Fri Oct 19, 2018 12:52 pm
michaeljc70 wrote:
Tue Oct 16, 2018 9:47 am
I'm surprised how much talk there is of TLH after a 9 year bull market. The market is only down a few percent.
International isn't in any 9 year bull market, that's for sure. People get things from older family members who've passed every day and invest it so anything put in international the past 18 months was pretty much ripe for harvesting last week. I harvested VXUS into IXUS in August, then back into VXUS in October. ETFs make it more complex (as opposed to MFs) as you don't want to get eaten up with bid/asks but it's not something I plan on doing a whole heck of a lot. But to your point, I know plenty who harvested all the way through March 2009 that will never see loss harvesting in those accounts again obviously. Some have started separate brokerage accounts along the way to give them that option rather than keeping it clean and in one taxable account. It's not a big deal to have VTI or VXUS at several different custodians (Fido/Schwab/TDA/Merrill/ etc etc) for many. Some of them tell me once they double their cost basis they pretty much leave it alone and go find some other brokerage slobbering over them with account opening benefits.
It is true Total Intl is down about 17% if you bought at the absolute peak (2018Q1) and were selling now. If you bought between 2008Q3 and before 2017Q2, you would have no loss or minimal loss. Most people have 20-40% of equity in international (so not a huge part of their portfolio). Some have it entirely or mostly in tax deferred accounts. So, taking that all into account, yes, I am still surprised. But maybe they have a lot more $$$ than I have and it is amounting to something substantial.

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Re: How much of a dip do you want before you TLH?

Post by randomizer » Fri Oct 19, 2018 1:57 pm

With index funds you may not know the net asset value at the end of the day, so you need to find an analogous ETF or index and watch that towards the close of the market; if it looks like it is going to end down with only a few minutes to go, put in the order(s) to TLH. In my experience, you want at least half a percent of margin for error in order to make sure you're definitely going to have a loss recorded (eg. you wouldn't try to harvest a 0.15% loss; it is too easy for things to blip and suddenly it's a 0.05% loss or not a loss at all). Additionally, I arbitrarily decided to not bother with this unless it was going to be in the ballpark of a thousand bucks of loss; I wouldn't both if it were just a hundred bucks. Laziness on my part.
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Re: How much of a dip do you want before you TLH?

Post by minesweep » Fri Oct 19, 2018 2:03 pm

michaeljc70 wrote:
Tue Oct 16, 2018 9:47 am
I'm surprised how much talk there is of TLH after a 9 year bull market. The market is only down a few percent.
TLH applies to bond funds too. I took a $1,011 tax lost a couple of weeks ago. While it's not a huge loss it's worth the little time that it takes to do it. I switched from the TE Intermediate Term to the TE Limited Term bond fund. I have the option of switching back again after 31 days or just keeping the TE Limited Term fund (or possibly do another TLH later).

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Re: How much of a dip do you want before you TLH?

Post by KlangFool » Fri Oct 19, 2018 2:09 pm

michaeljc70 wrote:
Fri Oct 19, 2018 1:39 pm
deltaneutral83 wrote:
Fri Oct 19, 2018 12:52 pm
michaeljc70 wrote:
Tue Oct 16, 2018 9:47 am
I'm surprised how much talk there is of TLH after a 9 year bull market. The market is only down a few percent.
International isn't in any 9 year bull market, that's for sure. People get things from older family members who've passed every day and invest it so anything put in international the past 18 months was pretty much ripe for harvesting last week. I harvested VXUS into IXUS in August, then back into VXUS in October. ETFs make it more complex (as opposed to MFs) as you don't want to get eaten up with bid/asks but it's not something I plan on doing a whole heck of a lot. But to your point, I know plenty who harvested all the way through March 2009 that will never see loss harvesting in those accounts again obviously. Some have started separate brokerage accounts along the way to give them that option rather than keeping it clean and in one taxable account. It's not a big deal to have VTI or VXUS at several different custodians (Fido/Schwab/TDA/Merrill/ etc etc) for many. Some of them tell me once they double their cost basis they pretty much leave it alone and go find some other brokerage slobbering over them with account opening benefits.
It is true Total Intl is down about 17% if you bought at the absolute peak (2018Q1) and were selling now. If you bought between 2008Q3 and before 2017Q2, you would have no loss or minimal loss. Most people have 20-40% of equity in international (so not a huge part of their portfolio). Some have it entirely or mostly in tax deferred accounts. So, taking that all into account, yes, I am still surprised. But maybe they have a lot more $$$ than I have and it is amounting to something substantial.
michaeljc70,

My taxable account is about 500K. My international stock index fund in the taxable account is about 150K. I just TLH.

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Re: How much of a dip do you want before you TLH?

Post by GrowthSeeker » Fri Oct 19, 2018 2:43 pm

Hulk wrote:
Tue Oct 16, 2018 9:06 am
TLHed for the first time last week. Thanks to all on this website who have contributed to my education on this.
Well, I TLHed for the first time just yesterday.
Here was my reasoning.
I'm 66, already receiving SS, so I have only a few years to do Roth conversions. I haven't decided yet how aggressively I want to do Roth conversions, but in general, I do not think I want to Roth convert to the point of going over the NIIT MAGI threshold.
But for 2018, I sold a lot of individual stocks and have quite a bit of realized gain, mostly long term. It is also the last year I expect to have any earned income. Unfortunately I'm into NIIT territory for this year. So this year is probably the last year I'll be paying the extra NIIT 3.8% on LTCGs (15% + 3.8% = 18.8%).

Since I sold a lot of stock this year, I had a lot of cash to put into a 3-fund (-ish) type portfolio. Some of the recent purchases had some short term loss: some more recent purchases of VTI (Total Stock Market) and some VOHIX (Ohio tax free bond fund). So by swapping those for VOO (S&P 500) and VWIUX (Intermediate-Term Tax-Exempt Fund, not an exact TLH partner, but ...) I'll have short term losses to partially offset long term gains.
Whatever short term losses I realize this year, will become that much larger long term gains in some future year. But in the future year, those gains will be taxed at 15% (or maybe some at 0% if I am done with Roth conversions). Whereas for 2018, those gains are taxed at 18.8%
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Re: How much of a dip do you want before you TLH?

Post by michaeljc70 » Fri Oct 19, 2018 2:44 pm

A lot of Bogleheads want Roths because you are paying the tax now rather than in the future. However, isn't TLH doing the opposite of this? Obviously, these are capital gains/losses and not ordinary income. I am not saying TLH cannot be beneficial, but doesn't it somewhat depend on your current tax rate vs. future tax rates? If rates stay the same, then due to present value a $1 saved today is worth more than a $1 paid in the future.

I'm not trying to be obtuse, but trying understand where people are getting these losses from and the thought process on deciding to take them.

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Re: How much of a dip do you want before you TLH?

Post by KlangFool » Fri Oct 19, 2018 2:52 pm

michaeljc70 wrote:
Fri Oct 19, 2018 2:44 pm
A lot of Bogleheads want Roths because you are paying the tax now rather than in the future. However, isn't TLH doing the opposite of this? Obviously, these are capital gains/losses and not ordinary income. I am not saying TLH cannot be beneficial, but doesn't it somewhat depend on your current tax rate vs. future tax rates? If rates stay the same, then due to present value a $1 saved today is worth more than a $1 paid in the future.
michaeljc70,

<< I am not saying TLH cannot be beneficial, but doesn't it somewhat depend on your current tax rate vs. future tax rates? >>

1) Yes, but some people can tax-manage their tax rate close to zero now and zero in the future. This is especially true if their portfolio is spread across all 3 buckets: taxable, Roth, and tax-deferred. For that kind of people, they could tax-manage to generate whatever amount of taxable income every year.

2) Please note that folks can "Tax Gain Harvest" at 0% long-term capital gain tax at time X. Then, they could TLH at subsequent years.

KlangFool

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Re: How much of a dip do you want before you TLH?

Post by michaeljc70 » Fri Oct 19, 2018 3:03 pm

KlangFool wrote:
Fri Oct 19, 2018 2:52 pm
michaeljc70 wrote:
Fri Oct 19, 2018 2:44 pm
A lot of Bogleheads want Roths because you are paying the tax now rather than in the future. However, isn't TLH doing the opposite of this? Obviously, these are capital gains/losses and not ordinary income. I am not saying TLH cannot be beneficial, but doesn't it somewhat depend on your current tax rate vs. future tax rates? If rates stay the same, then due to present value a $1 saved today is worth more than a $1 paid in the future.
michaeljc70,

<< I am not saying TLH cannot be beneficial, but doesn't it somewhat depend on your current tax rate vs. future tax rates? >>

1) Yes, but some people can tax-manage their tax rate close to zero now and zero in the future. This is especially true if their portfolio is spread across all 3 buckets: taxable, Roth, and tax-deferred. For that kind of people, they could tax-manage to generate whatever amount of taxable income every year.

2) Please note that folks can "Tax Gain Harvest" at 0% long-term capital gain tax at time X. Then, they could TLH at subsequent years.

KlangFool
Thanks for the responses. I did gain harvesting last year as my income was low enough to get it in the 0% bracket (I still had to pay state taxes though). It seems my stuff is setup differently than others. 80% of my portfolio is non-taxable. I also have my international and bonds all in non-taxable. I may have a higher % in non-taxable than many due to being self-employed most of my life and being able to contribute more to non-taxable.

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Re: How much of a dip do you want before you TLH?

Post by KlangFool » Fri Oct 19, 2018 3:07 pm

michaeljc70 wrote:
Fri Oct 19, 2018 3:03 pm
KlangFool wrote:
Fri Oct 19, 2018 2:52 pm
michaeljc70 wrote:
Fri Oct 19, 2018 2:44 pm
A lot of Bogleheads want Roths because you are paying the tax now rather than in the future. However, isn't TLH doing the opposite of this? Obviously, these are capital gains/losses and not ordinary income. I am not saying TLH cannot be beneficial, but doesn't it somewhat depend on your current tax rate vs. future tax rates? If rates stay the same, then due to present value a $1 saved today is worth more than a $1 paid in the future.
michaeljc70,

<< I am not saying TLH cannot be beneficial, but doesn't it somewhat depend on your current tax rate vs. future tax rates? >>

1) Yes, but some people can tax-manage their tax rate close to zero now and zero in the future. This is especially true if their portfolio is spread across all 3 buckets: taxable, Roth, and tax-deferred. For that kind of people, they could tax-manage to generate whatever amount of taxable income every year.

2) Please note that folks can "Tax Gain Harvest" at 0% long-term capital gain tax at time X. Then, they could TLH at subsequent years.

KlangFool
Thanks for the responses. I did gain harvesting last year as my income was low enough to get it in the 0% bracket (I still had to pay state taxes though). It seems my stuff is setup differently than others. 80% of my portfolio is non-taxable. I also have my international and bonds all in non-taxable. I may have a higher % in non-taxable than many due to being self-employed most of my life and being able to contribute more to non-taxable.
michaeljc70,

You are probably normal. I am probably the unusual one.

<<I also have my international and bonds all in non-taxable.>>

This year is a good year for TLH of international stock. Last year is a good year for TLH of Small Cap Value stock. So, a good approach is to put highly volatile asset class into the taxable account.

KlangFool

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Re: How much of a dip do you want before you TLH?

Post by FoolMeOnce » Fri Oct 19, 2018 3:14 pm

Hulk wrote:
Tue Oct 16, 2018 9:06 am
Lets say the stock market drops again this week and I TLH again. My porfolio gets even more complicated with another round of TLHing.
You could consider just waiting 30 days after the first TLH and if the new fund is down then (or even slightly up), sell and buy back the original fund to maintain your desired simplicity.

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Re: How much of a dip do you want before you TLH?

Post by grabiner » Fri Oct 19, 2018 9:17 pm

michaeljc70 wrote:
Fri Oct 19, 2018 2:44 pm
A lot of Bogleheads want Roths because you are paying the tax now rather than in the future. However, isn't TLH doing the opposite of this? Obviously, these are capital gains/losses and not ordinary income. I am not saying TLH cannot be beneficial, but doesn't it somewhat depend on your current tax rate vs. future tax rates?
There are three fundamental differences between these arguments. These are reasons that traditional versus Roth is break-even if your tax rate doesn't change, while tax loss harvesting is a net benefit.

You mentioned one of the reasons: tax loss harvesting may save you in taxes now at your full tax rate (if the loss offsets short-term gains, or up to $3000 against ordinary income), while the reduced basis will be taxed at the rate on long-term gains. If tax rates don't change and you are in a 24% tax bracket, a $1000 harvest saves you $240 now and costs you $150 later.

Another issue is that tax loss harvesting saves tax now and costs you tax later on the same number of dollars, while using a traditional account saves you tax now but costs you tax on a larger amount later. Suppose that you have $10,000 in stock with a basis of $11,000, and you don't sell until the stock doubles in value; at $20,000, you have a $9000 capital gain and your after-tax value is $18,650. If you harvest the loss and it offsets a gain taxed at 15%, you can reinvest $10,150. If this doubles in value to $20,300, you have a $10,150 capital gain and your after-tax value is $18,777; you gained $127 even though you postponed tax at the same rate.

In contrast, If you are in a 24% tax bracket, you can contribute $1000 to a traditional IRA or $760 to a Roth IRA. If the market doubles in value, you have $2000 in a traditional IRA or $1520 in a Roth IRA, and if you are still in a 24% bracket, this is break-even.

The third benefit of tax loss harvesting is that you might never pay the tax on the increased capital gain; you might donate the stock to charity or leave it to your heirs. I have benefited from this; I sold stock to harvest losses in 2002 and 2008, and the stock I bought as a replacement has a very low basis, so it is the stock I used for charitable donations.
Wiki David Grabiner

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