Tax Loss Harvesting as a couple

[Kaldoot]

Hi, Long time lurker and appreciate all the knowledge that this forum dispenses freely. I have yet another tax loss harvesting question .

I wanted to understand if tax loss harvesting would work as a couple even if file taxes separately. Here is the scenario,
I sell tax of Stock # 1 with LTG of $100k
My wife sells tax of Stock # 2 with LT Loss of $100k

Is our tax liability zero on this case ?

[Rocky Mtn Man]

Hi, Long time lurker and appreciate all the knowledge that this forum dispenses freely. I have yet another tax loss harvesting question .

I wanted to understand if tax loss harvesting would work as a couple even if file taxes separately. Here is the scenario,
I sell tax of Stock # 1 with LTG of $100k
My wife sells tax of Stock # 2 with LT Loss of $100k

Is our tax liability zero on this case ?

Correct me if I'm wrong, but you are asking about the tax advantages of Married Filing Separately? I think you would have to each file using your own brokerage 1099-B's, in which case you cannot 'cancel' out each other's gains with losses. It would be similar to an unmarried couple living together. Married Filing Separately only saves taxes in a few rare situations versus Married Filing Jointly.

I'm not a tax expert, so I stand by to be corrected!

[toddthebod]

Hi, Long time lurker and appreciate all the knowledge that this forum dispenses freely. I have yet another tax loss harvesting question .

I wanted to understand if tax loss harvesting would work as a couple even if file taxes separately. Here is the scenario,
I sell tax of Stock # 1 with LTG of $100k
My wife sells tax of Stock # 2 with LT Loss of $100k

Is our tax liability zero on this case ?

Probably depends on whether the investments are marital or separate property, and whether you live in a community property state. Assuming you do not, and this is separate property, the answer is likely no.

[Kaldoot]

Some more clarifications -

1. Assets are in separate individual brokerage accounts (not sure how that impacts anything because that would imply we need to have all stocks at one brokerage to harvest gains or losses)
2. We did buy/earn these stocks while being married and do live in a community property state, CA. Quick read through the internet suggests investments are considered community property and divided equally.

The reason to file jointly vs separately is being thought for another favorable tax reason.

Appreciate any other insight as well (we are asking our CPA as well).

[Rocky Mtn Man]

Some more clarifications -

1. Assets are in separate individual brokerage accounts (not sure how that impacts anything because that would imply we need to have all stocks at one brokerage to harvest gains or losses)
2. We did buy/earn these stocks while being married and do live in a community property state, CA. Quick read through the internet suggests investments are considered community property and divided equally.

The reason to file jointly vs separately is being thought for another favorable tax reason.

Appreciate any other insight as well (we are asking our CPA as well).

1. The individual brokerage accounts do not matter. It all is added up at the end when you file. Say you have $5,000 in short term losses at Fidelity and $6,000 in short term gains at Vanguard. You are net positive $1000. Long term gains are treated differently with reduced taxes. Tax loss harvesting is a more complicated matter, there are many threads here on that.

2. For income tax purposes, it doesn't matter when you acquired the stocks/bonds/ETFs/mutual funds. If you are married on December 31st, you file as a married couple for that year. The beauty of married filing jointly is the names on the accounts don't matter, it's one tax return for the couple. It simplifies things.

[toddthebod]

Some more clarifications -

1. Assets are in separate individual brokerage accounts (not sure how that impacts anything because that would imply we need to have all stocks at one brokerage to harvest gains or losses)
2. We did buy/earn these stocks while being married and do live in a community property state, CA. Quick read through the internet suggests investments are considered community property and divided equally.

The reason to file jointly vs separately is being thought for another favorable tax reason.

Appreciate any other insight as well (we are asking our CPA as well).

Then you should each be reporting half of everything on each of your MFS returns, so the answer to your original question is yes. Look at Form 8958.

[Kaldoot]

Some more clarifications -

1. Assets are in separate individual brokerage accounts (not sure how that impacts anything because that would imply we need to have all stocks at one brokerage to harvest gains or losses)
2. We did buy/earn these stocks while being married and do live in a community property state, CA. Quick read through the internet suggests investments are considered community property and divided equally.

The reason to file jointly vs separately is being thought for another favorable tax reason.

Appreciate any other insight as well (we are asking our CPA as well).

1. The individual brokerage accounts do not matter. It all is added up at the end when you file. Say you have $5,000 in short term losses at Fidelity and $6,000 in short term gains at Vanguard. You are net positive $1000. Long term gains are treated differently with reduced taxes. Tax loss harvesting is a more complicated matter, there are many threads here on that.

2. For income tax purposes, it doesn't matter when you acquired the stocks/bonds/ETFs/mutual funds. If you are married on December 31st, you file as a married couple for that year. The beauty of married filing jointly is the names on the accounts don't matter, it's one tax return for the couple. It simplifies things.

@Rocky Mtn Man, we are trying to do married filing jointly for a different reason and see how it impacts balancing long term gains and long term losses between the two of us. The reason I thought why when we earned this income matters is because it would help solidify whether that income is community property or not. If it is community property, then we simply divide the losses and profits by 2 and each file that in our individual tax return.

Some more clarifications -

1. Assets are in separate individual brokerage accounts (not sure how that impacts anything because that would imply we need to have all stocks at one brokerage to harvest gains or losses)
2. We did buy/earn these stocks while being married and do live in a community property state, CA. Quick read through the internet suggests investments are considered community property and divided equally.

The reason to file jointly vs separately is being thought for another favorable tax reason.

Appreciate any other insight as well (we are asking our CPA as well).

Then you should each be reporting half of everything on each of your MFS returns, so the answer to your original question is yes. Look at Form 8958.

Thanks sounds good. This aligns with what I was thinking but definitely will confirm with our CPA.