When to Tax Loss Harvest?

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Topic Author
ForeverInvestorILL
Posts: 179
Joined: Mon Feb 29, 2016 11:48 pm

When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 9:46 am

Good morning All - With the recent market activities, there seems to be more posts here and from financial bloggers (WC Investor, etc) on taking advantage of TLH this dip. I have been reading the wiki page and others to try to educate myself.

But admittedly, I have never done this before so wanted to ask the forum:
-I have been buying VTSAX in taxable account every month for the past 3 years and have never sold
-Let’s say my account is $24K and in total have a ST loss of $300 and LT gain of $1,000

Do I look for specific lots where I have a long term loss and sell/buy into VFINX (VG SP 500)?
Does it matter whether the loss is short term or long term from a tax perspective? / Is one a better option to TLH?
Also, if I were to do this, the tax form I would receive next year is a 1099-B? I don’t think this would be the case but if I ever had more than $3,000 in losses, how does that carry over to the following years?

Thanks BH’s!

Grogs
Posts: 620
Joined: Tue Mar 24, 2015 4:55 pm

Re: When to Tax Loss Harvest?

Post by Grogs » Sat Feb 29, 2020 9:59 am

ForeverInvestorILL wrote:
Sat Feb 29, 2020 9:46 am
Good morning All - With the recent market activities, there seems to be more posts here and from financial bloggers (WC Investor, etc) on taking advantage of TLH this dip. I have been reading the wiki page and others to try to educate myself.

But admittedly, I have never done this before so wanted to ask the forum:
-I have been buying VTSAX in taxable account every month for the past 3 years and have never sold
-Let’s say my account is $24K and in total have a ST loss of $300 and LT gain of $1,000

Do I look for specific lots where I have a long term loss and sell/buy into VFINX (VG SP 500)?
Does it matter whether the loss is short term or long term from a tax perspective? / Is one a better option to TLH?
Also, if I were to do this, the tax form I would receive next year is a 1099-B? I don’t think this would be the case but if I ever had more than $3,000 in losses, how does that carry over to the following years?

Thanks BH’s!
Hopefully yor account is set up for SpecID already. When you look at your account on VG, next to the VTSAX shares there should be 3 buttons: buy, sell, and trade. If you click 'trade', it will show you each lot along with the gain/loss based on the last close (i.e., Friday's close if you TLH on Monday). Then you just click the box next to the lots with losses. Note that you have to account for market moves on Monday, which won't be shown on this screen. That's why it's usually good to do this near the end of the day so you can see how markets are doing. Just look at VTI since it gives intra-day prices and should match VTSAX closely at the end of the day. On the next screen, you pick the fund you want to trade into, select 100%, and there you go. Make sure to turn off auto-invest and dividend reinvestment if you haven't already.

As for the losses, ST are somewhat better because they can be used to offset ST or LT gains, if you have any. LT losses can only offset LT gains. And either can offset up to $3k in income if you have no losses.

Topic Author
ForeverInvestorILL
Posts: 179
Joined: Mon Feb 29, 2016 11:48 pm

Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 10:38 am

Grogs wrote:
Sat Feb 29, 2020 9:59 am
ForeverInvestorILL wrote:
Sat Feb 29, 2020 9:46 am
Good morning All - With the recent market activities, there seems to be more posts here and from financial bloggers (WC Investor, etc) on taking advantage of TLH this dip. I have been reading the wiki page and others to try to educate myself.

But admittedly, I have never done this before so wanted to ask the forum:
-I have been buying VTSAX in taxable account every month for the past 3 years and have never sold
-Let’s say my account is $24K and in total have a ST loss of $300 and LT gain of $1,000

Do I look for specific lots where I have a long term loss and sell/buy into VFINX (VG SP 500)?
Does it matter whether the loss is short term or long term from a tax perspective? / Is one a better option to TLH?
Also, if I were to do this, the tax form I would receive next year is a 1099-B? I don’t think this would be the case but if I ever had more than $3,000 in losses, how does that carry over to the following years?

Thanks BH’s!
Hopefully yor account is set up for SpecID already. When you look at your account on VG, next to the VTSAX shares there should be 3 buttons: buy, sell, and trade. If you click 'trade', it will show you each lot along with the gain/loss based on the last close (i.e., Friday's close if you TLH on Monday). Then you just click the box next to the lots with losses. Note that you have to account for market moves on Monday, which won't be shown on this screen. That's why it's usually good to do this near the end of the day so you can see how markets are doing. Just look at VTI since it gives intra-day prices and should match VTSAX closely at the end of the day. On the next screen, you pick the fund you want to trade into, select 100%, and there you go. Make sure to turn off auto-invest and dividend reinvestment if you haven't already.

As for the losses, ST are somewhat better because they can be used to offset ST or LT gains, if you have any. LT losses can only offset LT gains. And either can offset up to $3k in income if you have no losses.
Thanks Grogs, this is very helpful. Yes, I have set to SpecID already but need to turn off dividend reinvestment. I will monitor VTI on Monday.

One more question - If I TLH loss on Monday and the market goes down another 10% over the next few months, can you just keep TLH into other similar funds? Is there a certain $ threshold where it’s worth it?

bugleheadd
Posts: 262
Joined: Fri Nov 29, 2019 11:25 am

Re: When to Tax Loss Harvest?

Post by bugleheadd » Sat Feb 29, 2020 10:50 am

can some one help me understand why TLH is needed?

so i buy X for $100. it goes down to $50. I sell for $50 realized loss.

then with the $50 i have left i buy Y. it goes up to $150. i sell for $150. i have to pay tax on $50 of the gain.

so why not just hold X to $150? you pay tax on $50 of the gain as well.

can someone give me a good example of TLH?

ruud
Posts: 295
Joined: Sat Mar 03, 2007 1:28 pm
Location: san francisco bay area

Re: When to Tax Loss Harvest?

Post by ruud » Sat Feb 29, 2020 11:09 am

bugleheadd wrote:
Sat Feb 29, 2020 10:50 am
can some one help me understand why TLH is needed?

so i buy X for $100. it goes down to $50. I sell for $50 realized loss.

then with the $50 i have left i buy Y. it goes up to $150. i sell for $150. i have to pay tax on $50 of the gain.

so why not just hold X to $150? you pay tax on $50 of the gain as well.

can someone give me a good example of TLH?
Yes, in the grand scheme of things you pay tax on the same amount of gains. However, you get a benefit now and defer the payment to later (when you may even be in a lower tax bracket as well)
.

Grogs
Posts: 620
Joined: Tue Mar 24, 2015 4:55 pm

Re: When to Tax Loss Harvest?

Post by Grogs » Sat Feb 29, 2020 11:10 am

ForeverInvestorILL wrote:
Sat Feb 29, 2020 10:38 am
Thanks Grogs, this is very helpful. Yes, I have set to SpecID already but need to turn off dividend reinvestment. I will monitor VTI on Monday.

One more question - If I TLH loss on Monday and the market goes down another 10% over the next few months, can you just keep TLH into other similar funds? Is there a certain $ threshold where it’s worth it?
The threshold is really personal. For me, it's probably not worth the trouble for < $500, but everyone is different. With mutual funds, you have to take into account the possibility markets will move up between when you put in the order and when the market closes. For example, yesterday I put in an order at 3 PM and VTI was down ~2.5%, but closed at -0.67%. If you get a small gain, it's not a big deal (just offsets some of the loss), but I usually only TLH lots that are down about 2% or more based on where the market is to try and avoid that.

You can TLH again to be sure. If it's over 31 days since you last sold or bought VTSAX, you can just do a round trip. If it's less than that, you'll have to find a 3rd partner like Vanguard large-cap index and use that instead. I've only done a round-trip, so perhaps others can offer pointers on how to use 3 or more partners efficiently in rapidly falling markets.
bugleheadd wrote:
Sat Feb 29, 2020 10:50 am
can some one help me understand why TLH is needed?

so i buy X for $100. it goes down to $50. I sell for $50 realized loss.

then with the $50 i have left i buy Y. it goes up to $150. i sell for $150. i have to pay tax on $50 of the gain.

so why not just hold X to $150? you pay tax on $50 of the gain as well.

can someone give me a good example of TLH?
It's a tax deferral strategy, that's correct. But the tax you pay on the same gain may be lower later. Some examples:

- You offset $3k in income at 24% now and pay 15% LTCG on the same $3k when you sell
- In retirement, you're in a low tax bracket and you pay 0% on the LTCG (whereas you would pay 15% now)
- You pass those shares to an heir and they get a stepped up basis to the value when you die
- You donate the shares directly to a charity (or a donor advised fund) and never pay the gains

Topic Author
ForeverInvestorILL
Posts: 179
Joined: Mon Feb 29, 2016 11:48 pm

Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 11:36 am

Grogs wrote:
Sat Feb 29, 2020 11:10 am
ForeverInvestorILL wrote:
Sat Feb 29, 2020 10:38 am
Thanks Grogs, this is very helpful. Yes, I have set to SpecID already but need to turn off dividend reinvestment. I will monitor VTI on Monday.

One more question - If I TLH loss on Monday and the market goes down another 10% over the next few months, can you just keep TLH into other similar funds? Is there a certain $ threshold where it’s worth it?
The threshold is really personal. For me, it's probably not worth the trouble for < $500, but everyone is different. With mutual funds, you have to take into account the possibility markets will move up between when you put in the order and when the market closes. For example, yesterday I put in an order at 3 PM and VTI was down ~2.5%, but closed at -0.67%. If you get a small gain, it's not a big deal (just offsets some of the loss), but I usually only TLH lots that are down about 2% or more based on where the market is to try and avoid that.

You can TLH again to be sure. If it's over 31 days since you last sold or bought VTSAX, you can just do a round trip. If it's less than that, you'll have to find a 3rd partner like Vanguard large-cap index and use that instead. I've only done a round-trip, so perhaps others can offer pointers on how to use 3 or more partners efficiently in rapidly falling markets.
bugleheadd wrote:
Sat Feb 29, 2020 10:50 am
can some one help me understand why TLH is needed?

so i buy X for $100. it goes down to $50. I sell for $50 realized loss.

then with the $50 i have left i buy Y. it goes up to $150. i sell for $150. i have to pay tax on $50 of the gain.

so why not just hold X to $150? you pay tax on $50 of the gain as well.

can someone give me a good example of TLH?
It's a tax deferral strategy, that's correct. But the tax you pay on the same gain may be lower later. Some examples:

- You offset $3k in income at 24% now and pay 15% LTCG on the same $3k when you sell
- In retirement, you're in a low tax bracket and you pay 0% on the LTCG (whereas you would pay 15% now)
- You pass those shares to an heir and they get a stepped up basis to the value when you die
- You donate the shares directly to a charity (or a donor advised fund) and never pay the gains
Thanks Grogs - Very helpful. And I agree with your threshold above, very insightful.

On the Wash Sale piece - If I TLH say $1,000 out of VTSAX and into VFINX on Monday and then want to add an additional $250 (new money) to my portfolio on 3/5, can I only buy into VFINX?

Grogs
Posts: 620
Joined: Tue Mar 24, 2015 4:55 pm

Re: When to Tax Loss Harvest?

Post by Grogs » Sat Feb 29, 2020 12:53 pm

ForeverInvestorILL wrote:
Sat Feb 29, 2020 11:36 am

Thanks Grogs - Very helpful. And I agree with your threshold above, very insightful.

On the Wash Sale piece - If I TLH say $1,000 out of VTSAX and into VFINX on Monday and then want to add an additional $250 (new money) to my portfolio on 3/5, can I only buy into VFINX?
That's right. And since you're selling a mutual fund, Vanguard's frequent trading policies will prevent you from buying more VTSAX for 30 days anyway.

Topic Author
ForeverInvestorILL
Posts: 179
Joined: Mon Feb 29, 2016 11:48 pm

Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 1:26 pm

Grogs wrote:
Sat Feb 29, 2020 12:53 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 11:36 am

Thanks Grogs - Very helpful. And I agree with your threshold above, very insightful.

On the Wash Sale piece - If I TLH say $1,000 out of VTSAX and into VFINX on Monday and then want to add an additional $250 (new money) to my portfolio on 3/5, can I only buy into VFINX?
That's right. And since you're selling a mutual fund, Vanguard's frequent trading policies will prevent you from buying more VTSAX for 30 days anyway.
Thank you very much! If I have say $1,000 in TLH losses, is there any advantage / thing to do on the long term gains side to capitalize on that? Aka cash in long term gains against the losses and use the proceeds to re buy into a different fund? As I mentioned I’m usually an every month buy and hold investor so just trying to make sure I understand all that comes along with it.

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BL
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Re: When to Tax Loss Harvest?

Post by BL » Sat Feb 29, 2020 2:29 pm

Since your income tax rates are generally (always?) higher than your capital gains rate, it is better to use it to off-set ordinary income up to $3000, with any remaining saved for the next year.

The only time I would prefer it to off-set Capital Gains would be if I had some unwanted funds that I really wanted to get rid of, or if I needed to sell stock funds to raise money.

Whenever you do sell with CGs, you must use whatever losses you have to off-set gains; you don't have a choice in the matter.

Topic Author
ForeverInvestorILL
Posts: 179
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Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 3:36 pm

BL wrote:
Sat Feb 29, 2020 2:29 pm
Since your income tax rates are generally (always?) higher than your capital gains rate, it is better to use it to off-set ordinary income up to $3000, with any remaining saved for the next year.

The only time I would prefer it to off-set Capital Gains would be if I had some unwanted funds that I really wanted to get rid of, or if I needed to sell stock funds to raise money.

Whenever you do sell with CGs, you must use whatever losses you have to off-set gains; you don't have a choice in the matter.
Thanks BL, this is exactly what I was looking for.

The only question that is unanswered is how do the losses carry over if above $3,000? Is that something a tax prep software would track?

fortyofforty
Posts: 2083
Joined: Wed Mar 31, 2010 12:33 pm

Re: When to Tax Loss Harvest?

Post by fortyofforty » Sat Feb 29, 2020 5:17 pm

ForeverInvestorILL wrote:
Sat Feb 29, 2020 3:36 pm
BL wrote:
Sat Feb 29, 2020 2:29 pm
Since your income tax rates are generally (always?) higher than your capital gains rate, it is better to use it to off-set ordinary income up to $3000, with any remaining saved for the next year.

The only time I would prefer it to off-set Capital Gains would be if I had some unwanted funds that I really wanted to get rid of, or if I needed to sell stock funds to raise money.

Whenever you do sell with CGs, you must use whatever losses you have to off-set gains; you don't have a choice in the matter.
Thanks BL, this is exactly what I was looking for.

The only question that is unanswered is how do the losses carry over if above $3,000? Is that something a tax prep software would track?
I know that TurboTax tracks it. Not sure about other software.

Topic Author
ForeverInvestorILL
Posts: 179
Joined: Mon Feb 29, 2016 11:48 pm

Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 6:22 pm

fortyofforty wrote:
Sat Feb 29, 2020 5:17 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 3:36 pm
BL wrote:
Sat Feb 29, 2020 2:29 pm
Since your income tax rates are generally (always?) higher than your capital gains rate, it is better to use it to off-set ordinary income up to $3000, with any remaining saved for the next year.

The only time I would prefer it to off-set Capital Gains would be if I had some unwanted funds that I really wanted to get rid of, or if I needed to sell stock funds to raise money.

Whenever you do sell with CGs, you must use whatever losses you have to off-set gains; you don't have a choice in the matter.
Thanks BL, this is exactly what I was looking for.

The only question that is unanswered is how do the losses carry over if above $3,000? Is that something a tax prep software would track?
I know that TurboTax tracks it. Not sure about other software.
Thanks Forty, I use TT so that’s good to know.

Topic Author
ForeverInvestorILL
Posts: 179
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Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 7:21 pm

One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?

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anon_investor
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Re: When to Tax Loss Harvest?

Post by anon_investor » Sat Feb 29, 2020 7:27 pm

ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.

Triple digit golfer
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Re: When to Tax Loss Harvest?

Post by Triple digit golfer » Sat Feb 29, 2020 7:28 pm

ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
Yep, if the sale is within 30 days of the dividend reinvestment.

fortyofforty
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Joined: Wed Mar 31, 2010 12:33 pm

Re: When to Tax Loss Harvest?

Post by fortyofforty » Sat Feb 29, 2020 7:58 pm

For that reason, I do not hold identical funds in taxable and tax-advantaged accounts. You might want to switch funds to something similar but not substantially identical to your taxable fund.

Topic Author
ForeverInvestorILL
Posts: 179
Joined: Mon Feb 29, 2016 11:48 pm

Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 8:40 pm

fortyofforty wrote:
Sat Feb 29, 2020 7:58 pm
For that reason, I do not hold identical funds in taxable and tax-advantaged accounts. You might want to switch funds to something similar but not substantially identical to your taxable fund.
Thanks all. If I do turn off dividend reinvestment in Roth, that dividend money still remains in the Roth IRA correct? Meaning it gets directed to the settlement account for just the Roth? And I could just re buy into VTSAX 32 days later? I also hold VTIAX in my Roth so could just take the dividend $ and buy that.

UpperNwGuy
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Re: When to Tax Loss Harvest?

Post by UpperNwGuy » Sat Feb 29, 2020 8:51 pm

I am retired, and I do not expect to ever be in a lower tax bracket than the one I am in now, so tax loss harvesting has less appeal for me than it has for those bogleheads who are still in the workforce.

Triple digit golfer
Posts: 5326
Joined: Mon May 18, 2009 5:57 pm

Re: When to Tax Loss Harvest?

Post by Triple digit golfer » Sat Feb 29, 2020 8:55 pm

ForeverInvestorILL wrote:
Sat Feb 29, 2020 8:40 pm
fortyofforty wrote:
Sat Feb 29, 2020 7:58 pm
For that reason, I do not hold identical funds in taxable and tax-advantaged accounts. You might want to switch funds to something similar but not substantially identical to your taxable fund.
Thanks all. If I do turn off dividend reinvestment in Roth, that dividend money still remains in the Roth IRA correct? Meaning it gets directed to the settlement account for just the Roth? And I could just re buy into VTSAX 32 days later? I also hold VTIAX in my Roth so could just take the dividend $ and buy that.
Yes to all.

Topic Author
ForeverInvestorILL
Posts: 179
Joined: Mon Feb 29, 2016 11:48 pm

Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 8:59 pm

Triple digit golfer wrote:
Sat Feb 29, 2020 8:55 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 8:40 pm
fortyofforty wrote:
Sat Feb 29, 2020 7:58 pm
For that reason, I do not hold identical funds in taxable and tax-advantaged accounts. You might want to switch funds to something similar but not substantially identical to your taxable fund.
Thanks all. If I do turn off dividend reinvestment in Roth, that dividend money still remains in the Roth IRA correct? Meaning it gets directed to the settlement account for just the Roth? And I could just re buy into VTSAX 32 days later? I also hold VTIAX in my Roth so could just take the dividend $ and buy that.
Yes to all.
Thanks Triple digit, much appreciated!

Triple digit golfer
Posts: 5326
Joined: Mon May 18, 2009 5:57 pm

Re: When to Tax Loss Harvest?

Post by Triple digit golfer » Sat Feb 29, 2020 9:04 pm

ForeverInvestorILL wrote:
Sat Feb 29, 2020 8:59 pm
Triple digit golfer wrote:
Sat Feb 29, 2020 8:55 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 8:40 pm
fortyofforty wrote:
Sat Feb 29, 2020 7:58 pm
For that reason, I do not hold identical funds in taxable and tax-advantaged accounts. You might want to switch funds to something similar but not substantially identical to your taxable fund.
Thanks all. If I do turn off dividend reinvestment in Roth, that dividend money still remains in the Roth IRA correct? Meaning it gets directed to the settlement account for just the Roth? And I could just re buy into VTSAX 32 days later? I also hold VTIAX in my Roth so could just take the dividend $ and buy that.
Yes to all.
Thanks Triple digit, much appreciated!
No problem. I am in almost an identical situation with the funds that you mentioned. I am also sort of a novice when it comes to harvesting losses. It can get tricky.

If the market declines another few percentage points, I will be selling VTSAX in taxable and replacing with Vanguard Large Cap Index. I carry VTSAX in our IRAs also, so I will have to turn off automatic reinvestment before the March dividend. I will then transfer the amounts from the settlement account into VTIAX. Better than letting it sit not invested, and the amounts aren't going to be much.

Remember to also turn off automatic dividend reinvestment in the taxable account for VTSAX.

fortyofforty
Posts: 2083
Joined: Wed Mar 31, 2010 12:33 pm

Re: When to Tax Loss Harvest?

Post by fortyofforty » Sat Feb 29, 2020 9:11 pm

UpperNwGuy wrote:
Sat Feb 29, 2020 8:51 pm
I am retired, and I do not expect to ever be in a lower tax bracket than the one I am in now, so tax loss harvesting has less appeal for me than it has for those bogleheads who are still in the workforce.
Can you not still use losses to offset capital gains? Even if you don't sell your shares, mutual funds do throw off capital gains.

Triple digit golfer
Posts: 5326
Joined: Mon May 18, 2009 5:57 pm

Re: When to Tax Loss Harvest?

Post by Triple digit golfer » Sat Feb 29, 2020 9:15 pm

fortyofforty wrote:
Sat Feb 29, 2020 9:11 pm
UpperNwGuy wrote:
Sat Feb 29, 2020 8:51 pm
I am retired, and I do not expect to ever be in a lower tax bracket than the one I am in now, so tax loss harvesting has less appeal for me than it has for those bogleheads who are still in the workforce.
Can you not still use losses to offset capital gains? Even if you don't sell your shares, mutual funds do throw off capital gains.
Not Vanguard total market funds.

Topic Author
ForeverInvestorILL
Posts: 179
Joined: Mon Feb 29, 2016 11:48 pm

Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Feb 29, 2020 9:26 pm

Triple digit golfer wrote:
Sat Feb 29, 2020 9:04 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 8:59 pm
Triple digit golfer wrote:
Sat Feb 29, 2020 8:55 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 8:40 pm
fortyofforty wrote:
Sat Feb 29, 2020 7:58 pm
For that reason, I do not hold identical funds in taxable and tax-advantaged accounts. You might want to switch funds to something similar but not substantially identical to your taxable fund.
Thanks all. If I do turn off dividend reinvestment in Roth, that dividend money still remains in the Roth IRA correct? Meaning it gets directed to the settlement account for just the Roth? And I could just re buy into VTSAX 32 days later? I also hold VTIAX in my Roth so could just take the dividend $ and buy that.
Yes to all.
Thanks Triple digit, much appreciated!
No problem. I am in almost an identical situation with the funds that you mentioned. I am also sort of a novice when it comes to harvesting losses. It can get tricky.

If the market declines another few percentage points, I will be selling VTSAX in taxable and replacing with Vanguard Large Cap Index. I carry VTSAX in our IRAs also, so I will have to turn off automatic reinvestment before the March dividend. I will then transfer the amounts from the settlement account into VTIAX. Better than letting it sit not invested, and the amounts aren't going to be much.

Remember to also turn off automatic dividend reinvestment in the taxable account for VTSAX.
Haha glad to see someone out there is in the same boat! I agree with your point, I’m just educating myself if the market loses another say 5% to be ready to act. I have additional complications because I’m just on the threshold to invest my HSA balance $ and the lowest cost/best option there is VFIAX so I’m leaning towards VG Large Cap as my TLH partner in taxable as well.

Triple digit golfer
Posts: 5326
Joined: Mon May 18, 2009 5:57 pm

Re: When to Tax Loss Harvest?

Post by Triple digit golfer » Sat Feb 29, 2020 9:32 pm

ForeverInvestorILL wrote:
Sat Feb 29, 2020 9:26 pm
Triple digit golfer wrote:
Sat Feb 29, 2020 9:04 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 8:59 pm
Triple digit golfer wrote:
Sat Feb 29, 2020 8:55 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 8:40 pm


Thanks all. If I do turn off dividend reinvestment in Roth, that dividend money still remains in the Roth IRA correct? Meaning it gets directed to the settlement account for just the Roth? And I could just re buy into VTSAX 32 days later? I also hold VTIAX in my Roth so could just take the dividend $ and buy that.
Yes to all.
Thanks Triple digit, much appreciated!
No problem. I am in almost an identical situation with the funds that you mentioned. I am also sort of a novice when it comes to harvesting losses. It can get tricky.

If the market declines another few percentage points, I will be selling VTSAX in taxable and replacing with Vanguard Large Cap Index. I carry VTSAX in our IRAs also, so I will have to turn off automatic reinvestment before the March dividend. I will then transfer the amounts from the settlement account into VTIAX. Better than letting it sit not invested, and the amounts aren't going to be much.

Remember to also turn off automatic dividend reinvestment in the taxable account for VTSAX.
Haha glad to see someone out there is in the same boat! I agree with your point, I’m just educating myself if the market loses another say 5% to be ready to act. I have additional complications because I’m just on the threshold to invest my HSA balance $ and the lowest cost/best option there is VFIAX so I’m leaning towards VG Large Cap as my TLH partner in taxable as well.
I also hold VFIAX in my 401k. Basically the same situation! Large Cap Index, 500 index, and Total Stock are all good substitutes for one another.

:sharebeer

UpperNwGuy
Posts: 3671
Joined: Sun Oct 08, 2017 7:16 pm

Re: When to Tax Loss Harvest?

Post by UpperNwGuy » Sat Feb 29, 2020 9:45 pm

fortyofforty wrote:
Sat Feb 29, 2020 9:11 pm
UpperNwGuy wrote:
Sat Feb 29, 2020 8:51 pm
I am retired, and I do not expect to ever be in a lower tax bracket than the one I am in now, so tax loss harvesting has less appeal for me than it has for those bogleheads who are still in the workforce.
Can you not still use losses to offset capital gains? Even if you don't sell your shares, mutual funds do throw off capital gains.
Of course, but (a) I don't have much in the way of losses in that I've been buying mostly bonds for several months now to keep within my AA boundaries, and (b) my capital gains are unrealized. My main funds are at Vanguard and don't throw off capital gains distributions.

fortyofforty
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Re: When to Tax Loss Harvest?

Post by fortyofforty » Sun Mar 01, 2020 8:17 am

UpperNwGuy wrote:
Sat Feb 29, 2020 9:45 pm
fortyofforty wrote:
Sat Feb 29, 2020 9:11 pm
UpperNwGuy wrote:
Sat Feb 29, 2020 8:51 pm
I am retired, and I do not expect to ever be in a lower tax bracket than the one I am in now, so tax loss harvesting has less appeal for me than it has for those bogleheads who are still in the workforce.
Can you not still use losses to offset capital gains? Even if you don't sell your shares, mutual funds do throw off capital gains.
Of course, but (a) I don't have much in the way of losses in that I've been buying mostly bonds for several months now to keep within my AA boundaries, and (b) my capital gains are unrealized. My main funds are at Vanguard and don't throw off capital gains distributions.
It's a nice tax "problem" to have. Because of when I bought, I only have small losses that are not worth the effort to TLH right now.

Can you lock in capital losses and carry them forward, in perpetuity (until the time comes you want to sell to generate cash)?

UpperNwGuy
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Re: When to Tax Loss Harvest?

Post by UpperNwGuy » Sun Mar 01, 2020 8:35 am

fortyofforty wrote:
Sun Mar 01, 2020 8:17 am
UpperNwGuy wrote:
Sat Feb 29, 2020 9:45 pm
fortyofforty wrote:
Sat Feb 29, 2020 9:11 pm
UpperNwGuy wrote:
Sat Feb 29, 2020 8:51 pm
I am retired, and I do not expect to ever be in a lower tax bracket than the one I am in now, so tax loss harvesting has less appeal for me than it has for those bogleheads who are still in the workforce.
Can you not still use losses to offset capital gains? Even if you don't sell your shares, mutual funds do throw off capital gains.
Of course, but (a) I don't have much in the way of losses in that I've been buying mostly bonds for several months now to keep within my AA boundaries, and (b) my capital gains are unrealized. My main funds are at Vanguard and don't throw off capital gains distributions.
It's a nice tax "problem" to have. Because of when I bought, I only have small losses that are not worth the effort to TLH right now.

Can you lock in capital losses and carry them forward, in perpetuity (until the time comes you want to sell to generate cash)?
Without losses, I have nothing to lock in and carry forward.

fortyofforty
Posts: 2083
Joined: Wed Mar 31, 2010 12:33 pm

Re: When to Tax Loss Harvest?

Post by fortyofforty » Sun Mar 01, 2020 8:10 pm

UpperNwGuy wrote:
Sun Mar 01, 2020 8:35 am
fortyofforty wrote:
Sun Mar 01, 2020 8:17 am
UpperNwGuy wrote:
Sat Feb 29, 2020 9:45 pm
fortyofforty wrote:
Sat Feb 29, 2020 9:11 pm
UpperNwGuy wrote:
Sat Feb 29, 2020 8:51 pm
I am retired, and I do not expect to ever be in a lower tax bracket than the one I am in now, so tax loss harvesting has less appeal for me than it has for those bogleheads who are still in the workforce.
Can you not still use losses to offset capital gains? Even if you don't sell your shares, mutual funds do throw off capital gains.
Of course, but (a) I don't have much in the way of losses in that I've been buying mostly bonds for several months now to keep within my AA boundaries, and (b) my capital gains are unrealized. My main funds are at Vanguard and don't throw off capital gains distributions.
It's a nice tax "problem" to have. Because of when I bought, I only have small losses that are not worth the effort to TLH right now.

Can you lock in capital losses and carry them forward, in perpetuity (until the time comes you want to sell to generate cash)?
Without losses, I have nothing to lock in and carry forward.
Sorry, was not directed specifically at your situation. Was a general question.

Almond
Posts: 87
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Re: When to Tax Loss Harvest?

Post by Almond » Mon Mar 02, 2020 7:51 am

If you have some LT CG and also some ST CL it is an opportunity THL against LT CG assuming you don’t have ST CG and step up your entry price on the shares you hold. in a taxable account this can be very helpful.

Topic Author
ForeverInvestorILL
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Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Fri Mar 06, 2020 9:00 am

Apologies for resurfacing an old thread but since this is still relevant I wanted to ask the forum.

If I bought (with new money), additional shares of VTSAX yesterday (3/5) - this is my normal monthly purchase, can I not tax loss harvest VTSAX until 31 days from now (4/6) or can I still tax loss harvest other lots of VTSAX, just not the 3/5 lot? Thanks.

Topic Author
ForeverInvestorILL
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Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Fri Mar 06, 2020 10:56 pm

Friday night bump!

absolute zero
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Re: When to Tax Loss Harvest?

Post by absolute zero » Sat Mar 07, 2020 12:03 am

ForeverInvestorILL wrote:
Fri Mar 06, 2020 9:00 am
Apologies for resurfacing an old thread but since this is still relevant I wanted to ask the forum.

If I bought (with new money), additional shares of VTSAX yesterday (3/5) - this is my normal monthly purchase, can I not tax loss harvest VTSAX until 31 days from now (4/6) or can I still tax loss harvest other lots of VTSAX, just not the 3/5 lot? Thanks.
You’ve actually got it backwards. There is only 1 VTSAX lot that you can sell in the next 31 days for a loss and NOT generate a wash sale. And that 1 lot is the 3/5 lot.

Topic Author
ForeverInvestorILL
Posts: 179
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Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Sat Mar 07, 2020 7:56 am

absolute zero wrote:
Sat Mar 07, 2020 12:03 am
ForeverInvestorILL wrote:
Fri Mar 06, 2020 9:00 am
Apologies for resurfacing an old thread but since this is still relevant I wanted to ask the forum.

If I bought (with new money), additional shares of VTSAX yesterday (3/5) - this is my normal monthly purchase, can I not tax loss harvest VTSAX until 31 days from now (4/6) or can I still tax loss harvest other lots of VTSAX, just not the 3/5 lot? Thanks.
You’ve actually got it backwards. There is only 1 VTSAX lot that you can sell in the next 31 days for a loss and NOT generate a wash sale. And that 1 lot is the 3/5 lot.
Thanks Absolute. So then I have to sell my 3/5 lot and then I want to sell all other lots that have a loss whether that is my 2/5 lot or a 2019 lot? If I do that on 3/10, then I can’t buy more VTSAX in ANY account until 4/11? Can I take the 3/29 VTSAX dividends and buy VLCAX in taxable (as the TLH partner)?

My apologies, all of this 31 days timing before/after and 60 day qualified dividend is confusing!

Topic Author
ForeverInvestorILL
Posts: 179
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Re: When to Tax Loss Harvest?

Post by ForeverInvestorILL » Mon Mar 09, 2020 8:31 am

Bumping this as I would like some clarification before TLH today!
Last edited by ForeverInvestorILL on Mon Mar 09, 2020 8:42 am, edited 1 time in total.

atdharris
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Re: When to Tax Loss Harvest?

Post by atdharris » Mon Mar 09, 2020 8:40 am

I'll probably start harvesting some losses today. At least I can offset the gains I had when I sold some individual stock earlier this year

fortyofforty
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Re: When to Tax Loss Harvest?

Post by fortyofforty » Wed Mar 11, 2020 9:09 pm

If an additional investment is made to an ETF, the entire position is sold at a loss ten days later, and no substantially identical shares are purchased within thirty days after the sale, is it the case that no "wash sale" would have occurred since no replacement shares were obtained? Or, would the initial purchase be considered the "replacement" shares even though they were purchased before the sale?

rm
Posts: 265
Joined: Fri Oct 31, 2008 6:09 pm

Re: When to Tax Loss Harvest?

Post by rm » Wed Mar 11, 2020 10:36 pm

anon_investor wrote:
Sat Feb 29, 2020 7:27 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.
Sorry, I don't understand what dividend re-investment has to do with TLH. If you hold the same fund in 2 accounts - one taxable and one tax deferred just sell the one in taxable at the loss.
And TLH in tax-deferred doesn't make sense, right?

User avatar
anon_investor
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Re: When to Tax Loss Harvest?

Post by anon_investor » Wed Mar 11, 2020 11:14 pm

rm wrote:
Wed Mar 11, 2020 10:36 pm
anon_investor wrote:
Sat Feb 29, 2020 7:27 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.
Sorry, I don't understand what dividend re-investment has to do with TLH. If you hold the same fund in 2 accounts - one taxable and one tax deferred just sell the one in taxable at the loss.
And TLH in tax-deferred doesn't make sense, right?
If you leave dividend reinvestment on in your tax deferred for VTSAX, and sell your VTSAX in taxable, if your VTSAX in your tax deferred account auto reinvest dividends within 30 days of sale of VTSAX in your taxable, that will cause a wash sale, disallowing some of tax loss. But since those shares in your taxable gain 0 benefit by having an increased tax basis, you lose that tax loss benefit forever...

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House Blend
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Re: When to Tax Loss Harvest?

Post by House Blend » Thu Mar 12, 2020 9:38 am

fortyofforty wrote:
Wed Mar 11, 2020 9:09 pm
If an additional investment is made to an ETF, the entire position is sold at a loss ten days later, and no substantially identical shares are purchased within thirty days after the sale, is it the case that no "wash sale" would have occurred since no replacement shares were obtained? Or, would the initial purchase be considered the "replacement" shares even though they were purchased before the sale?
This qualifies as a FAQ. The answer is: not a wash sale. (Unless their were other purchases inside the wash sale window that were not sold.)

I'll try to explain it in a novel way....

Each purchase you make creates a "tax lot". A wash sale has to involve the sale of a tax lot (at a loss) and a purchase of another, separate, tax lot (consisting of "substantially identical" securities).

If you want to wander out in the weeds, then you can ask what would happen if you had a tax lot consisting of 200 shares of X, and you sold 100 of them at a loss within 30 days of the purchase. Do the other 100 shares you still own count as replacement shares in a wash sale?

There are two answers to this question.

The first is: there is no reason for a tax loss harvester to do this. If your 200 shares are showing a loss, there is no reason to harvest only half of the losses. Sell them all.

The second answer is: expert opinion (such as found at Fairmark) is that the original 100 do not count as replacement shares, and it is still not a wash sale. I don't know if brokerages, who have to report sales of covered securities, agree with the experts. Maybe someone should do a small experiment.

fortyofforty
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Re: When to Tax Loss Harvest?

Post by fortyofforty » Thu Mar 12, 2020 5:20 pm

House Blend wrote:
Thu Mar 12, 2020 9:38 am
fortyofforty wrote:
Wed Mar 11, 2020 9:09 pm
If an additional investment is made to an ETF, the entire position is sold at a loss ten days later, and no substantially identical shares are purchased within thirty days after the sale, is it the case that no "wash sale" would have occurred since no replacement shares were obtained? Or, would the initial purchase be considered the "replacement" shares even though they were purchased before the sale?
This qualifies as a FAQ. The answer is: not a wash sale. (Unless their were other purchases inside the wash sale window that were not sold.)

I'll try to explain it in a novel way....

Each purchase you make creates a "tax lot". A wash sale has to involve the sale of a tax lot (at a loss) and a purchase of another, separate, tax lot (consisting of "substantially identical" securities).

If you want to wander out in the weeds, then you can ask what would happen if you had a tax lot consisting of 200 shares of X, and you sold 100 of them at a loss within 30 days of the purchase. Do the other 100 shares you still own count as replacement shares in a wash sale?

There are two answers to this question.

The first is: there is no reason for a tax loss harvester to do this. If your 200 shares are showing a loss, there is no reason to harvest only half of the losses. Sell them all.
Not true. If an investor thinks the market will continue to fall, it might be in her interest to sell part, and wait for the other half of the position to fall further.
House Blend wrote:
Thu Mar 12, 2020 9:38 am
The second answer is: expert opinion (such as found at Fairmark) is that the original 100 do not count as replacement shares, and it is still not a wash sale. I don't know if brokerages, who have to report sales of covered securities, agree with the experts. Maybe someone should do a small experiment.
The issue, boiled down, is whether it is possible for shares purchased less than 30 days in advance of a sale for a loss count as "replacement" shares, if the entire position is then liquidated.

If it's a FAQ, I still haven't found the specific parameters as I've outlined in any description, but your searching skills might surpass mine. The answers I've found so far, do not answer my question. It's selling some shares but not an entire position, or selling shares and then purchasing the same shares within 30 days, or other such factors not specifically covering the precise question I asked.

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FIREchief
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Re: When to Tax Loss Harvest?

Post by FIREchief » Thu Mar 12, 2020 5:59 pm

anon_investor wrote:
Sat Feb 29, 2020 7:27 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.
Is it the "worst kind" because adding the dis-allowed loss to the basis of the Roth shares purchased would be worthless?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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anon_investor
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Re: When to Tax Loss Harvest?

Post by anon_investor » Thu Mar 12, 2020 6:21 pm

FIREchief wrote:
Thu Mar 12, 2020 5:59 pm
anon_investor wrote:
Sat Feb 29, 2020 7:27 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.
Is it the "worst kind" because adding the dis-allowed loss to the basis of the Roth shares purchased would be worthless?
YEP! Unless you can tell me an ever worst kind?

jsapiandante
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Re: When to Tax Loss Harvest?

Post by jsapiandante » Thu Mar 12, 2020 6:35 pm

Another newbie question to add regardling TLH, can I sell multiple lots (in my case, over $3k in ST losses) from my last two purchases in 9/19 and 12/19? My plan is to exchange VTSAX into VFIAX. I'm just confused as to whether I can only TLH one lot at a time or if I can do it with multiple lots. Thanks!

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FIREchief
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Re: When to Tax Loss Harvest?

Post by FIREchief » Thu Mar 12, 2020 6:45 pm

anon_investor wrote:
Thu Mar 12, 2020 6:21 pm
FIREchief wrote:
Thu Mar 12, 2020 5:59 pm
anon_investor wrote:
Sat Feb 29, 2020 7:27 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.
Is it the "worst kind" because adding the dis-allowed loss to the basis of the Roth shares purchased would be worthless?
YEP! Unless you can tell me an ever worst kind?
Thanks partner! I'm a relative novice when it comes to TLH. I successfully accumulated around $10K in losses last year and realized the benefit on the 2019 tax returns I just completed. I was excited about a loss in my after tax account on Monday, but didn't realize it until after market close. I was again tracking it on Wednesday, but as I prepared to submit the sell/buy, I realized that I had purchased the same fund in two of my retirement accounts on 2/28. That would have negated about one third of the TLH benefit and, with your confirmation, apparently created a future LTCG tax liability for which I would benefit from no offset via basis increase in the retirement accounts. Fortunately I realized the error in my ways prior to submitting the order and stepped away from the cliff. With today's further significant drop, I'm hoping the market stays down until 3/31 when I will be able to cash in the losses without any wash. I will need to either cancel auto dividend reinvestment in my retirement accounts and HSA or sell those holdings and invest in similar funds. The fund with the loss is scheduled for an April dividend.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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anon_investor
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Re: When to Tax Loss Harvest?

Post by anon_investor » Thu Mar 12, 2020 8:10 pm

FIREchief wrote:
Thu Mar 12, 2020 6:45 pm
anon_investor wrote:
Thu Mar 12, 2020 6:21 pm
FIREchief wrote:
Thu Mar 12, 2020 5:59 pm
anon_investor wrote:
Sat Feb 29, 2020 7:27 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.
Is it the "worst kind" because adding the dis-allowed loss to the basis of the Roth shares purchased would be worthless?
YEP! Unless you can tell me an ever worst kind?
Thanks partner! I'm a relative novice when it comes to TLH. I successfully accumulated around $10K in losses last year and realized the benefit on the 2019 tax returns I just completed. I was excited about a loss in my after tax account on Monday, but didn't realize it until after market close. I was again tracking it on Wednesday, but as I prepared to submit the sell/buy, I realized that I had purchased the same fund in two of my retirement accounts on 2/28. That would have negated about one third of the TLH benefit and, with your confirmation, apparently created a future LTCG tax liability for which I would benefit from no offset via basis increase in the retirement accounts. Fortunately I realized the error in my ways prior to submitting the order and stepped away from the cliff. With today's further significant drop, I'm hoping the market stays down until 3/31 when I will be able to cash in the losses without any wash. I will need to either cancel auto dividend reinvestment in my retirement accounts and HSA or sell those holdings and invest in similar funds. The fund with the loss is scheduled for an April dividend.
I have a similar situation to yours with VTSAX. But I don't have to wait as long, I can sell on Monday without a wash sale. I turned off dividend reinvestment for VTSAX in my Roth IRA (next dividend will be end of March). I exchanged $3k of VTSAX in my Roth IRA for another fund (that I will not use in my taxable account), and will just invest VTSAX dividends into that fund. After new wash sale period over I can just exchange that fund back into VTSAX.

rm
Posts: 265
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Re: When to Tax Loss Harvest?

Post by rm » Fri Mar 13, 2020 8:49 pm

anon_investor wrote:
Wed Mar 11, 2020 11:14 pm
rm wrote:
Wed Mar 11, 2020 10:36 pm
anon_investor wrote:
Sat Feb 29, 2020 7:27 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.
Sorry, I don't understand what dividend re-investment has to do with TLH. If you hold the same fund in 2 accounts - one taxable and one tax deferred just sell the one in taxable at the loss.
And TLH in tax-deferred doesn't make sense, right?
If you leave dividend reinvestment on in your tax deferred for VTSAX, and sell your VTSAX in taxable, if your VTSAX in your tax deferred account auto reinvest dividends within 30 days of sale of VTSAX in your taxable, that will cause a wash sale, disallowing some of tax loss. But since those shares in your taxable gain 0 benefit by having an increased tax basis, you lose that tax loss benefit forever...
I am sorry. That still doesn't make sense to me. The reinvest of dividends is happening in tax deferred account. What does that have to do with taxable account.
I guess I need some education since first time TLHing. Is there a link which explains this in more detail

Also, how does one turn off divident re-investment. I am doing this for ETFs and I didn't think there was a way to turn off this feature.

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anon_investor
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Re: When to Tax Loss Harvest?

Post by anon_investor » Fri Mar 13, 2020 8:54 pm

rm wrote:
Fri Mar 13, 2020 8:49 pm
anon_investor wrote:
Wed Mar 11, 2020 11:14 pm
rm wrote:
Wed Mar 11, 2020 10:36 pm
anon_investor wrote:
Sat Feb 29, 2020 7:27 pm
ForeverInvestorILL wrote:
Sat Feb 29, 2020 7:21 pm
One more question on Wash Sale - If I also hold VTSAX in my Roth IRA and I automatically reinvest dividends (say in March 2020), is that going to create a wash sale problem if the same fund of held in two accounts (Brokerage & Roth IRA)?
YES! Turn off dividend reinvestment. That would be the worst kind of wash sale.
Sorry, I don't understand what dividend re-investment has to do with TLH. If you hold the same fund in 2 accounts - one taxable and one tax deferred just sell the one in taxable at the loss.
And TLH in tax-deferred doesn't make sense, right?
If you leave dividend reinvestment on in your tax deferred for VTSAX, and sell your VTSAX in taxable, if your VTSAX in your tax deferred account auto reinvest dividends within 30 days of sale of VTSAX in your taxable, that will cause a wash sale, disallowing some of tax loss. But since those shares in your taxable gain 0 benefit by having an increased tax basis, you lose that tax loss benefit forever...
I am sorry. That still doesn't make sense to me. The reinvest of dividends is happening in tax deferred account. What does that have to do with taxable account.
I guess I need some education since first time TLHing. Is there a link which explains this in more detail

Also, how does one turn off divident re-investment. I am doing this for ETFs and I didn't think there was a way to turn off this feature.
Please read the forum's wiki on the subject:
https://www.bogleheads.org/wiki/Wash_sale

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