Simple Tax Planning and TLH Questions

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rafan18
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Joined: Mon Sep 17, 2018 12:51 pm

Simple Tax Planning and TLH Questions

Post by rafan18 » Tue May 14, 2019 10:16 pm

Hello, I had a few simple tax-related questions I was hoping to help get clarified in my head.

1) -5/1/2019 Buy stock in
-5/15/2019 Sell all stock at 10% loss and never buy again
Can I write the losses off?

2) What if same example as above but I only sell half the stock and never buy again?

3) Also, does it make sense to sell stocks with long-term capital gains next year if my income falls to a level where the capital gains tax rate is at 0% (i.e. MFJ - 60K Gross Income)? This might be the only time in awhile for me to do this, so does it make sense to take 20K of gains off the table in order to claim them at 0% federal?

Thank you in advance!

megabad
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Joined: Fri Jun 01, 2018 4:00 pm

Re: Simple Tax Planning and TLH Questions

Post by megabad » Tue May 14, 2019 10:50 pm

If you do not repurchase the substantially identical security within the 30 day forward AND 30 day backwards looking time periods, typically this would not be a wash sale.

And Yes, I would generally think it would be a good idea to "tax gain harvest" if you have a year in which you drop below the 0% LTCG bracket.

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FiveK
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Joined: Sun Mar 16, 2014 2:43 pm

Re: Simple Tax Planning and TLH Questions

Post by FiveK » Tue May 14, 2019 11:10 pm

rafan18 wrote:
Tue May 14, 2019 10:16 pm
3) Also, does it make sense to sell stocks with long-term capital gains next year if my income falls to a level where the capital gains tax rate is at 0% (i.e. MFJ - 60K Gross Income)? This might be the only time in awhile for me to do this, so does it make sense to take 20K of gains off the table in order to claim them at 0% federal?
It does make sense.

It often makes even more sense to do traditional->Roth conversions at those low rates, particularly if you intend to leave the money invested more than a few years.

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House Blend
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Re: Simple Tax Planning and TLH Questions

Post by House Blend » Wed May 15, 2019 8:37 pm

rafan18 wrote:
Tue May 14, 2019 10:16 pm
1) -5/1/2019 Buy stock in
-5/15/2019 Sell all stock at 10% loss and never buy again
Can I write the losses off?
Yes, but you don't get to write off the entire loss immediately unless it is less than $3K, or you have enough realized capital gains in the same year to deduct against it.

If you harvest $25K in losses this year, and have no other trading activity, then on your 2019 taxes, you will report the loss, and $3K of it will be deducted against your income that year.

The other $22K in losses will carry forward to your 2020 taxes.

So if you harvest $20K of gains in 2020, the gain harvest will accomplish nothing other than to kill most of the value of your harvested loss: your $22K carryover loss will be deducted against your $20K in realized gains, leaving $2K in losses to deduct against ordinary income. The 0% LTCG tax doesn't even enter into the calculation.

With no harvested gains in 2020, you would deduct another $3K, and carryover $19K in losses to your 2021 taxes....

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