Tax loss harvesting with bonds?

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PartTimer
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Tax loss harvesting with bonds?

Post by PartTimer »

Any down side to selling bonds that are sitting at a loss to clear out capital gains on the stock side?

For example, let's say I'm sitting on $10,000 capital loss in BND right now and sell enough VTI to wipe out $10,000 capital gains. The intent would be to park the money in something not substantially similar to either for 30 days and then buy by back in to both after 30 days.

I guess I'm not really clear on the idea of buying into bond funds for the "right" duration and then selling them before that time is up for tax loss harvesting.
rkhusky
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Re: Tax loss harvesting with bonds?

Post by rkhusky »

Nothing wrong with TLH’ing a bond fund. But why not use losses against income at $3K/year?
mhalley
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Re: Tax loss harvesting with bonds?

Post by mhalley »

Since bonds usually don’t have a large change in just a month you could just keep it in the mm fund and buy back in. Otherwise, there are other bond funds that you could hold for the rest of your life and not having to switch back in a month. Int term treasury, int term bond index come to mind.
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WoodSpinner
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Re: Tax loss harvesting with bonds?

Post by WoodSpinner »

OP,

Would you also immediately buy back in to VTI? Or use the proceeds for something else?

WoodSpinner
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cchrissyy
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Re: Tax loss harvesting with bonds?

Post by cchrissyy »

For example, let's say I'm sitting on $10,000 capital loss in BND right now and sell enough VTI to wipe out $10,000 capital gains. The intent would be to park the money in something not substantially similar to either for 30 days and then buy by back in to both after 30 days.
You can buy VTI back right away. the 30 days is only related to deducting losses.
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secondopinion
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Re: Tax loss harvesting with bonds?

Post by secondopinion »

rkhusky wrote: Sat Feb 26, 2022 8:09 pm Nothing wrong with TLH’ing a bond fund. But why not use losses against income at $3K/year?
Some day, one will hopefully be selling for a major gain in the long future; it would be nice to cut that future tax bill. Also, you have a tax deduction for many years to come if no gains are surfaced (and not enough dividends and such). It is not straight forward, but it might benefit reducing taxes anyway (even though it could take a while).
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convert949
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Re: Tax loss harvesting with bonds?

Post by convert949 »

Hmmm…. Would selling Total Bond Market and exchanging into Short Term Bond and buying Total Bond back after 30+ days qualify?
rkhusky
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Re: Tax loss harvesting with bonds?

Post by rkhusky »

convert949 wrote: Fri May 13, 2022 9:41 am Hmmm…. Would selling Total Bond Market and exchanging into Short Term Bond and buying Total Bond back after 30+ days qualify?
Qualifies as TLH.
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White Coat Investor
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Re: Tax loss harvesting with bonds?

Post by White Coat Investor »

PartTimer wrote: Sat Feb 26, 2022 8:01 pm Any down side to selling bonds that are sitting at a loss to clear out capital gains on the stock side?

For example, let's say I'm sitting on $10,000 capital loss in BND right now and sell enough VTI to wipe out $10,000 capital gains. The intent would be to park the money in something not substantially similar to either for 30 days and then buy by back in to both after 30 days.

I guess I'm not really clear on the idea of buying into bond funds for the "right" duration and then selling them before that time is up for tax loss harvesting.
I've TLHed my muni bond fund twice this year already. Luckily Vanguard has two pretty similar muni bond funds so really easy to switch between the two. It's up to you how you use the losses, but I wouldn't just use them to increase basis most of the time.
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SafeBonds
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Re: Tax loss harvesting with bonds?

Post by SafeBonds »

Just a heads up regarding the limitations of Vanguard brokerage. I couldn't figure out how to trade individual treasury bonds with SpecID. I could only do FIFO. I called Vanguard customer service. This is not possible at Vanguard brokerage. At least it wasn't around 5 or so years ago. The recent drawdown in bond prices let me get out of my individual bonds and now I use bond fund ETFs.
mega317
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Re: Tax loss harvesting with bonds?

Post by mega317 »

OP typically you'd prefer to deduct income this year at your marginal tax rate over using the losses on LT capital gains which are taxed at lower rate. This gets you a larger benefit today and continues to push the tax deferral of your capital gains until potentially a time when you're in a lower bracket.
SafeBonds wrote: Fri May 13, 2022 11:22 am Just a heads up regarding the limitations of Vanguard brokerage. I couldn't figure out how to trade individual treasury bonds with SpecID. I could only do FIFO. I called Vanguard customer service. This is not possible at Vanguard brokerage. At least it wasn't around 5 or so years ago. The recent drawdown in bond prices let me get out of my individual bonds and now I use bond fund ETFs.
This doesn't seem right. Can an experienced bond trader weigh in here?
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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