Deferring cap loss. Any reason to do so?

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ChinchillaWhiplash
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Deferring cap loss. Any reason to do so?

Post by ChinchillaWhiplash »

What situations might it be beneficial to defer capital losses by creating a wash sale? Wondering if there is ever a scenario where it makes sense. Guessing there could be some advantages if your tax situation changes. Anything else?
mhalley
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Re: Deferring cap loss. Any reason to do so?

Post by mhalley »

The only thing I can think of is to keep your income above the minimum to receive ACA subsidy and prevent going on Medicaid. There may be others, but that is all that comes to my mind.
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House Blend
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Re: Deferring cap loss. Any reason to do so?

Post by House Blend »

I did an intentional wash once. It was a question of choosing between
(a) having a wash and deferring some of the realizable loss, or
(b) having some of the recent dividends be non-qualified.
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grabiner
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Re: Deferring cap loss. Any reason to do so?

Post by grabiner »

If your capital loss would offset a capital gain this year, but you would rather postpone it to later years when it offsets ordinary income.

For example, you are in a 32% tax bracket, and harvested a $9000 capital loss in December. One of your other funds unexpectedly distributed a $9000 capital gain. If you create a wash sale by buying back the fund in which you harvested in the loss, and then sell it in January for an equal loss, you pay $1350 tax on the capital gain, but save $2880 over the following three years as it offsets income taxed at 32%.
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Re: Deferring cap loss. Any reason to do so?

Post by Running Bum »

Suppose this year the cap loss would cancel out a cap gain that would be taxed at 0% this year, but in some future year you could use the loss against regular income or cap gains that would have a 15% tax. That would be a reason to want to wash out a loss, wouldn't it?
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