Help with Tax Loss Harvesting

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invstar
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Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 11:23 am

BHs,

I have never done TLH and trying to see if I should do it now. I have opened a brokerage account with VG on 01/17/2018 (last month) and bought total of $30k assets of VTSAX (*Total Stock Market) and VTIAX (Total International Stocks). Below is the list of transactions:

01/16/2018 - VTSAX - 10k
01/23/2018 - VTIAX - 10k
01/29/2018 - VTSAX - 5k
01/29/2018 - VTIAX - 5k

Total additions of $30k. The current value of the account is $27,837.14 (A loss of $2162.86 if I sell now). Per VG, the total loss for VTSAX is $1,211.02 and VTIAX it's $954.30.

Now,
1. Do you think can I TLH?
2. If yes, can I swap the funds (i.e., use VTSAX funds to buy VTIAX and vice versa)?
3. What will be the consequences?

Sorry if the questions do not make any sense but I want to take advantage of the TLH is it is possible to minimize the losses. Thank you very much..

Invstar
Last edited by invstar on Sun Feb 11, 2018 6:23 pm, edited 1 time in total.

livesoft
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Re: Help with Tax Loss Harvesting

Post by livesoft » Sun Feb 11, 2018 11:29 am

1. Yes.
2. No. Do more research. Read the wiki.
3. You will get a tax break.
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codedude
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Re: Help with Tax Loss Harvesting

Post by codedude » Sun Feb 11, 2018 11:45 am

invstar,

Assuming you have not done any transactions in these or similar funds in your other accounts (401k, IRAs, any other taxable accounts), you can TLH.

Because you are trying to TLH both funds, if you sell VTIAX and buy VSIAX or vice versa, you may be doing a wash sale which defeats the purpose of TLH.

You can move from VTIAX to a fund with a different underlying index (an S&P 500 fund for example) and from VTIAX to a developed or emerging market fund (not a Vanguarder so cannot help with specific Vanguard funds).

If you wait 30 days after you do TLH, you can go back to original funds.

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 11:51 am

Thanks livesoft. I am going through TLH and Washsale links now..
livesoft wrote:
Sun Feb 11, 2018 11:29 am
1. Yes.
2. No. Do more research. Read the wiki.
3. You will get a tax break.

invstar
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Joined: Tue Apr 25, 2017 1:20 pm

Re: Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 11:51 am

Thanks thangngo. Going through the links..

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 12:07 pm

Thanks codedude. I realized my mistake. So if I buy everything S&P index (VFINX - Vanguard S &P 500 Index), will it be OK?
codedude wrote:
Sun Feb 11, 2018 11:45 am
invstar,

Assuming you have not done any transactions in these or similar funds in your other accounts (401k, IRAs, any other taxable accounts), you can TLH.

Because you are trying to TLH both funds, if you sell VTIAX and buy VSIAX or vice versa, you may be doing a wash sale which defeats the purpose of TLH.

You can move from VTIAX to a fund with a different underlying index (an S&P 500 fund for example) and from VTIAX to a developed or emerging market fund (not a Vanguarder so cannot help with specific Vanguard funds).

If you wait 30 days after you do TLH, you can go back to original funds.

codedude
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Re: Help with Tax Loss Harvesting

Post by codedude » Sun Feb 11, 2018 12:55 pm

From a capturing the tax without a wash sale perspective, it is Ok. But because the % of International stock in your portfolio would go down and the % of domestic stock would increase, you would be doing a TLH and a rebalancing at the same time. If that is your intent, great.

But if you are just doing a TLH, to stick to my asset allocation, I would do:
US total stock --> S and P 500 fund
Total international stock fund --> developed International fund

mega317
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Re: Help with Tax Loss Harvesting

Post by mega317 » Sun Feb 11, 2018 1:46 pm

In addition to the links, search the forum. Many enlightening TLH threads in just the last few days.

I don't know if minimizing the losses is a helpful way to think about it. You will save on taxes but you still lost money and that's OK. Minimizing losses can't be a major goal with stock investing.

H-Town
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Re: Help with Tax Loss Harvesting

Post by H-Town » Sun Feb 11, 2018 1:55 pm

mega317 wrote:
Sun Feb 11, 2018 1:46 pm
In addition to the links, search the forum. Many enlightening TLH threads in just the last few days.

I don't know if minimizing the losses is a helpful way to think about it. You will save on taxes but you still lost money and that's OK. Minimizing losses can't be a major goal with stock investing.
TLH allows you to take deductible loss now, lower cost basis and defer capital gain into the future. Therefore, it's subject to risk of rising capital tax rate in the future. The tax money you save from TLH should be invested in the market to hedge against tax on capital gain in the future. Implementing TLH strategy correctly will allow you to save $750 every year in the near future so that you can put that savings back into the market.

TLH seems exciting but it is not as effective as saving more money and buying when the market is dropping like now.

UpperNwGuy
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Re: Help with Tax Loss Harvesting

Post by UpperNwGuy » Sun Feb 11, 2018 1:59 pm

I find the OP interesting because I made significant investments in these same two funds on January 12, and I, too, have seen the value of my investment decline. However, I have no plan to sell. My view is that the best way to minimize my losses is to stay the course and watch the value of my investment grow after the correction is over.

codedude
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Re: Help with Tax Loss Harvesting

Post by codedude » Sun Feb 11, 2018 2:10 pm

The OP is not selling and moving into cash. He/she is selling, realizing a loss so that it can be used to reduce taxes, and then moving into similar funds without violating wash sale rules. His asset allocation remains (mostly) the same and is able to reduce taxes.

UpperNwGuy
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Re: Help with Tax Loss Harvesting

Post by UpperNwGuy » Sun Feb 11, 2018 2:22 pm

I understand that. I choose not to take that approach.

Nate79
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Re: Help with Tax Loss Harvesting

Post by Nate79 » Sun Feb 11, 2018 4:05 pm

UpperNwGuy wrote:
Sun Feb 11, 2018 1:59 pm
I find the OP interesting because I made significant investments in these same two funds on January 12, and I, too, have seen the value of my investment decline. However, I have no plan to sell. My view is that the best way to minimize my losses is to stay the course and watch the value of my investment grow after the correction is over.
Sounds like you need to read up on TLH because this has nothing to do with this topic.

UpperNwGuy
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Re: Help with Tax Loss Harvesting

Post by UpperNwGuy » Sun Feb 11, 2018 4:30 pm

Wait! I said I choose not to tax loss harvest in a situation almost identical to the OP, and you tell me (a) that I am off topic and (b) that I should go read about tax loss harvesting???? Hope there’s still room in this forum for an old fashioned buy and hold investor.

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 4:43 pm

Thank you All..

Also, do I need to wait until 30 days before I sell my current assets (which are in VTSAX and VFIAX?)? So I must wait until 02/29 to sell everything? Since I will be moving to other funds as codedude suggested, I will not have to wait for another 30 days or so..

H-Town
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Re: Help with Tax Loss Harvesting

Post by H-Town » Sun Feb 11, 2018 4:51 pm

invstar wrote:
Sun Feb 11, 2018 4:43 pm
Thank you All..

Also, do I need to wait until 30 days before I sell my current assets (which are in VTSAX and VFIAX?)? So I must wait until 02/29 to sell everything? Since I will be moving to other funds as codedude suggested, I will not have to wait for another 30 days or so..
If you exchange all VTSAX and VTIAX into similar ETFs, you don't have to wait. I find ETFs are much easier to execute TLH. You don't have to use Vanguard ETFs exclusively. See wiki pages for similar ETFs.

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 4:57 pm

Thanks thangngo. I will look into getting ETFs but can I do it this time if I buy ETFs? Does the 30 days rule still apply?
thangngo wrote:
Sun Feb 11, 2018 4:51 pm
invstar wrote:
Sun Feb 11, 2018 4:43 pm
Thank you All..

Also, do I need to wait until 30 days before I sell my current assets (which are in VTSAX and VFIAX?)? So I must wait until 02/29 to sell everything? Since I will be moving to other funds as codedude suggested, I will not have to wait for another 30 days or so..
If you exchange all VTSAX and VTIAX into similar ETFs, you don't have to wait. I find ETFs are much easier to execute TLH. You don't have to use Vanguard ETFs exclusively. See wiki pages for similar ETFs.

livesoft
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Re: Help with Tax Loss Harvesting

Post by livesoft » Sun Feb 11, 2018 5:00 pm

invstar wrote:
Sun Feb 11, 2018 4:43 pm
Thank you All..

Also, do I need to wait until 30 days before I sell my current assets (which are in VTSAX and VFIAX?)? So I must wait until 02/29 to sell everything? Since I will be moving to other funds as codedude suggested, I will not have to wait for another 30 days or so..
No, you do not need to wait even if you exchange into mutual funds. Example: VTSAX -> VLCAX, VFIAX -> VLCAX. VTIAX -> VFWAX. Done. (Be careful of typos in fund ticker symbols and be certain you are not switching asset class if you are trying to stay in the same asset class.)

Note that if you exchange into new-to-you Admiral share class funds, then you will need to meet the initial minimum investment amounts. Think about that a little bit. Hint: If you have only one lot (out of holding of say $20,000) with a $500 loss and the current value of the lot is $2,000, then you are not going to be able to exchange that one lot into a new-to-you Admiral share class fund (or into a new-to-you Investor share class fund). Get it?
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iceport
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Re: Help with Tax Loss Harvesting

Post by iceport » Sun Feb 11, 2018 5:09 pm

UpperNwGuy wrote:
Sun Feb 11, 2018 4:30 pm
Wait! I said I choose not to tax loss harvest in a situation almost identical to the OP, and you tell me (a) that I am off topic and (b) that I should go read about tax loss harvesting???? Hope there’s still room in this forum for an old fashioned buy and hold investor.
The disconnect is that if done as is often recommended (using non-substantially-identical replacement funds), you can take advantage of a loophole in the tax code that lets you stay 100% invested in the market and TLH at the same time. You'd still be considered a buy and hold investor while claiming a loss.
"Discipline matters more than allocation.” ─William Bernstein

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 5:39 pm

Livesoft, Thank you. I have two funds - VTSAX with $14k and VTIAX with $13.5k balance as of now (I have purchased $15k each = total of $30k). I am planning to exchange them with VTSAX-->VLCAX and VTIAX-->VFWAX admiral shares (as the balances would be more than 10k).
I purchased these funds less than a month ago, I hope it will not be an issue if I exchange them tomorrow with new funds (or sell and buy).

Thanks.
livesoft wrote:
Sun Feb 11, 2018 5:00 pm
invstar wrote:
Sun Feb 11, 2018 4:43 pm
Thank you All..

Also, do I need to wait until 30 days before I sell my current assets (which are in VTSAX and VFIAX?)? So I must wait until 02/29 to sell everything? Since I will be moving to other funds as codedude suggested, I will not have to wait for another 30 days or so..
No, you do not need to wait even if you exchange into mutual funds. Example: VTSAX -> VLCAX, VFIAX -> VLCAX. VTIAX -> VFWAX. Done. (Be careful of typos in fund ticker symbols and be certain you are not switching asset class if you are trying to stay in the same asset class.)

Note that if you exchange into new-to-you Admiral share class funds, then you will need to meet the initial minimum investment amounts. Think about that a little bit. Hint: If you have only one lot (out of holding of say $20,000) with a $500 loss and the current value of the lot is $2,000, then you are not going to be able to exchange that one lot into a new-to-you Admiral share class fund (or into a new-to-you Investor share class fund). Get it?

livesoft
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Re: Help with Tax Loss Harvesting

Post by livesoft » Sun Feb 11, 2018 5:41 pm

invstar wrote:
Sun Feb 11, 2018 5:39 pm
Livesoft, Thank you. I have two funds - VTSAX with $14k and VTIAX with $13.5k balance as of now (I have purchased $15k each = total of $30k). I am planning to exchange them with VTSAX-->VLCAX and VTIAX-->VFWAX admiral shares (as the balances would be more than 10k).
I purchased these funds less than a month ago, I hope it will not be an issue if I exchange them tomorrow with new funds (or sell and buy).
I don't see any issues unless the stock market goes up 10% tomorrow (or drops 30% :twisted:).
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Good Listener
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Re: Help with Tax Loss Harvesting

Post by Good Listener » Sun Feb 11, 2018 6:06 pm

I thought, maybe wrongly, that this might be a wash sale because he bought the second set of shares within 30 days of the planned sale. Or would that be only if OP sold the 1st lot and held the 2nd but he/she is selling both so it's ok?

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 6:21 pm

Either way I am excited.. :) Thanks for all the info livesoft..
livesoft wrote:
Sun Feb 11, 2018 5:41 pm
invstar wrote:
Sun Feb 11, 2018 5:39 pm
Livesoft, Thank you. I have two funds - VTSAX with $14k and VTIAX with $13.5k balance as of now (I have purchased $15k each = total of $30k). I am planning to exchange them with VTSAX-->VLCAX and VTIAX-->VFWAX admiral shares (as the balances would be more than 10k).
I purchased these funds less than a month ago, I hope it will not be an issue if I exchange them tomorrow with new funds (or sell and buy).
I don't see any issues unless the stock market goes up 10% tomorrow (or drops 30% :twisted:).

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Feb 11, 2018 6:26 pm

Good Listener,
Below are my sales of these two funds:

01/16/2018 - VTSAX - 10k
01/23/2018 - VTIAX - 10k
01/29/2018 - VTSAX - 5k
01/29/2018 - VTIAX - 5k

Total of 15k. If I sell them tomorrow and buy other funds as explained in previous posts, how can it violate if I buy non-identical funds? Please review my dates above and let me know if this is an issue..
Good Listener wrote:
Sun Feb 11, 2018 6:06 pm
I thought, maybe wrongly, that this might be a wash sale because he bought the second set of shares within 30 days of the planned sale. Or would that be only if OP sold the 1st lot and held the 2nd but he/she is selling both so it's ok?

codedude
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Re: Help with Tax Loss Harvesting

Post by codedude » Sun Feb 11, 2018 8:45 pm

invstar,

Your plan looks good. Please make sure you don't make any trades in VTSAX and VSIAX for 30 days after you execute the TLH trades.

If the 1/16 VTSAX lot had a profit instead of a loss, and you decided to keep it, and just sold the 1/29 lot, then you will not be able to take the loss on it immediately. It will be a wash sale and the loss will be added to the cost basis of the 1/16 lot and you can take the loss when you sold the 1/16 lot.

In your case, you are selling both lots together, so you are fine.

Good Listener
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Re: Help with Tax Loss Harvesting

Post by Good Listener » Sun Feb 11, 2018 9:09 pm

invstar wrote:
Sun Feb 11, 2018 6:26 pm
Good Listener,
Below are my sales of these two funds:

01/16/2018 - VTSAX - 10k
01/23/2018 - VTIAX - 10k
01/29/2018 - VTSAX - 5k
01/29/2018 - VTIAX - 5k

Total of 15k. If I sell them tomorrow and buy other funds as explained in previous posts, how can it violate if I buy non-identical funds? Please review my dates above and let me know if this is an issue..
Good Listener wrote:
Sun Feb 11, 2018 6:06 pm
I thought, maybe wrongly, that this might be a wash sale because he bought the second set of shares within 30 days of the planned sale. Or would that be only if OP sold the 1st lot and held the 2nd but he/she is selling both so it's ok?
I don't know. I was just asking. If the others say it is good, it is good. Maybe it's simply not rebuying AFTER the sale for 31 days.
Last edited by Good Listener on Mon Feb 12, 2018 6:59 pm, edited 1 time in total.

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Mon Feb 12, 2018 8:52 am

Good Listener, Your question raised concerns again.. Livesoft/Codedude/Others.. please clarify..
Good Listener wrote:
Sun Feb 11, 2018 9:09 pm
invstar wrote:
Sun Feb 11, 2018 6:26 pm
Good Listener,
Below are my sales of these two funds:

01/16/2018 - VTSAX - 10k
01/23/2018 - VTIAX - 10k
01/29/2018 - VTSAX - 5k
01/29/2018 - VTIAX - 5k

Total of 15k. If I sell them tomorrow and buy other funds as explained in previous posts, how can it violate if I buy non-identical funds? Please review my dates above and let me know if this is an issue..
Good Listener wrote:
Sun Feb 11, 2018 6:06 pm
I thought, maybe wrongly, that this might be a wash sale because he bought the second set of shares within 30 days of the planned sale. Or would that be only if OP sold the 1st lot and held the 2nd but he/she is selling both so it's ok?
I don't know. I was just asking. If the others say it is good, it is good. Maybe it's simply not rebutting AFTER the sale for 31 days.

livesoft
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Re: Help with Tax Loss Harvesting

Post by livesoft » Mon Feb 12, 2018 9:32 am

Good Listener is wrong on this. Does that help?
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invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Mon Feb 12, 2018 11:41 am

Yes Livesoft. No more questions!! :happy

Thanks.
livesoft wrote:
Mon Feb 12, 2018 9:32 am
Good Listener is wrong on this. Does that help?

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Mon Feb 12, 2018 4:00 pm

Thanks livesoft and everyone..

I have just exchanged both VTSAX and VTIAX with VLCAX (large cap). Actually since it's close to 4pm, I was in hurry and exchanged everything with VLCAX (I will review next month). So now everything ($27,837) will be in VLCAX.

I haven't changed the cost basis from default (average cost basis) as I assume it doesn't affect since this is a sale/exchange of entire lot(s).

I hope I haven't done any mistake as far as TLH is concerned..

Thanks.

livesoft
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Re: Help with Tax Loss Harvesting

Post by livesoft » Mon Feb 12, 2018 4:16 pm

invstar wrote:
Mon Feb 12, 2018 4:00 pm
I hope I haven't done any mistake as far as TLH is concerned..
Uh-oh! I just thought of something bad.







just kidding

In your new capacity as a TLH expert, you now get to try to be the first responder to all new TLH threads for the next 2 months. Good luck!
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Good Listener
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Re: Help with Tax Loss Harvesting

Post by Good Listener » Mon Feb 12, 2018 7:00 pm

livesoft wrote:
Mon Feb 12, 2018 9:32 am
Good Listener is wrong on this. Does that help?
Good Listener admits that he is often wrong but not here because he was asking.

livesoft
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Re: Help with Tax Loss Harvesting

Post by livesoft » Mon Feb 12, 2018 7:08 pm

^Yes, you are right.
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MotoTrojan
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Re: Help with Tax Loss Harvesting

Post by MotoTrojan » Mon Feb 12, 2018 9:09 pm

invstar wrote:
Mon Feb 12, 2018 4:00 pm
Thanks livesoft and everyone..

I have just exchanged both VTSAX and VTIAX with VLCAX (large cap). Actually since it's close to 4pm, I was in hurry and exchanged everything with VLCAX (I will review next month). So now everything ($27,837) will be in VLCAX.

I haven't changed the cost basis from default (average cost basis) as I assume it doesn't affect since this is a sale/exchange of entire lot(s).

I hope I haven't done any mistake as far as TLH is concerned..

Thanks.
You are now 100% in US equities. If you wanted to maintain the same exposure you should've split it between this and an International Developed fund. Not the end of the world, but that is a massive swing in your asset allocation, when one wasn't necessary. In general you should try to come up with an asset allocation, and maintain it within a reasonable rebalancing band.

livesoft
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Re: Help with Tax Loss Harvesting

Post by livesoft » Mon Feb 12, 2018 9:13 pm

MotoTrojan wrote:
Mon Feb 12, 2018 9:09 pm
You are now 100% in US equities.
... in the taxable account. We have no clue about the rest of their accounts. :) And maybe their 401(k) is huge, so this little bit doesn't move the needle much.

VLCAX is a great fund for taxable. 100% QDI.
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Re: Help with Tax Loss Harvesting

Post by MotoTrojan » Mon Feb 12, 2018 9:18 pm

livesoft wrote:
Mon Feb 12, 2018 9:13 pm
MotoTrojan wrote:
Mon Feb 12, 2018 9:09 pm
You are now 100% in US equities.
... in the taxable account. We have no clue about the rest of their accounts. :) And maybe their 401(k) is huge, so this little bit doesn't move the needle much.

VLCAX is a great fund for taxable. 100% QDI.
Of course. Almost mentioned that, but in principal it doesn't seem like the OP had the intended impact, assuming they made a conscious decision to go 50/50 with the initial buy(s).

Appreciate all of your TLH/wash-sale posts though; I am still patiently waiting for my first opportunity to take all I've learned from this forum (and your posts) and actually execute a harvest. For my sake (early accumulator) I hope I get some good opportunities.

Finridge
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Re: Help with Tax Loss Harvesting

Post by Finridge » Tue Feb 13, 2018 3:19 am

iceport wrote:
Sun Feb 11, 2018 5:09 pm
UpperNwGuy wrote:
Sun Feb 11, 2018 4:30 pm
Wait! I said I choose not to tax loss harvest in a situation almost identical to the OP, and you tell me (a) that I am off topic and (b) that I should go read about tax loss harvesting???? Hope there’s still room in this forum for an old fashioned buy and hold investor.
The disconnect is that if done as is often recommended (using non-substantially-identical replacement funds), you can take advantage of a loophole in the tax code that lets you stay 100% invested in the market and TLH at the same time. You'd still be considered a buy and hold investor while claiming a loss.

This. Some say that diversification is the only "free lunch". I think that is wrong. Because TLH'ing with mutual funds also provides a "free lunch".

If you do it right, you can maintain all the benefits of a "buy and hold" strategy--staying in the market and staying with your asset allocation, but with substantial tax benefits that translate into hard cash. It's all upside and no downside.

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Tue Feb 13, 2018 8:17 am

Livesoft,
Thanks and Sure:). I was going through some of the previous posts by you (TLH, washsale, general and a lot others with real time examples and screenshots) and they are very useful for new comers and people trying to understand how these things work. Thanks a lot for your contributions to this forum..
livesoft wrote:
Mon Feb 12, 2018 4:16 pm
invstar wrote:
Mon Feb 12, 2018 4:00 pm
I hope I haven't done any mistake as far as TLH is concerned..
Uh-oh! I just thought of something bad.







just kidding

In your new capacity as a TLH expert, you now get to try to be the first responder to all new TLH threads for the next 2 months. Good luck!

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iceport
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Re: Help with Tax Loss Harvesting

Post by iceport » Tue Feb 13, 2018 8:37 am

Finridge wrote:
Tue Feb 13, 2018 3:19 am
iceport wrote:
Sun Feb 11, 2018 5:09 pm
UpperNwGuy wrote:
Sun Feb 11, 2018 4:30 pm
Wait! I said I choose not to tax loss harvest in a situation almost identical to the OP, and you tell me (a) that I am off topic and (b) that I should go read about tax loss harvesting???? Hope there’s still room in this forum for an old fashioned buy and hold investor.
The disconnect is that if done as is often recommended (using non-substantially-identical replacement funds), you can take advantage of a loophole in the tax code that lets you stay 100% invested in the market and TLH at the same time. You'd still be considered a buy and hold investor while claiming a loss.

This. Some say that diversification is the only "free lunch". I think that is wrong. Because TLH'ing with mutual funds also provides a "free lunch".

If you do it right, you can maintain all the benefits of a "buy and hold" strategy--staying in the market and staying with your asset allocation, but with substantial tax benefits that translate into hard cash. It's all upside and no downside.
This is true, as long as you are accounting for the less-good side of TLH that is hardly ever discussed: the cost basis drops. Savvy investors are certainly considering this in their long term TLH plans, but novices might lose sight of it. There are two points to consider:

1) You have to remain focused on total after-tax returns. TLH is just an intermediate step along the way to finally spending the investment, and should be used with some planning. It's sometimes easy to forget that the lowered basis could partially offset other benefits of TLH.

2) Just as is the case with tax-deferral, on the day you TLH you will probably not know exactly how much the strategy will ultimately benefit you. To some extent, that will be dependent on future tax rates and structures, and your own personal situation at that future point in time. Those are most definitely not known now with precision.

Sure, claiming a loss and reducing income tax now at the expense of capital gains taxes later is a positive move (as far as we know now ;-)). And shares with huge capital gains can be given away or left to heirs, erasing the effect of a lowered cost basis. But many of us will eventually liquidate and spend appreciated shares, and the increased capital gains taxes then will partially offset the loss claimed now.
"Discipline matters more than allocation.” ─William Bernstein

Finridge
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Re: Help with Tax Loss Harvesting

Post by Finridge » Tue Feb 13, 2018 2:12 pm

iceport wrote:
Tue Feb 13, 2018 8:37 am
Finridge wrote:
Tue Feb 13, 2018 3:19 am
iceport wrote:
Sun Feb 11, 2018 5:09 pm
UpperNwGuy wrote:
Sun Feb 11, 2018 4:30 pm
Wait! I said I choose not to tax loss harvest in a situation almost identical to the OP, and you tell me (a) that I am off topic and (b) that I should go read about tax loss harvesting???? Hope there’s still room in this forum for an old fashioned buy and hold investor.
The disconnect is that if done as is often recommended (using non-substantially-identical replacement funds), you can take advantage of a loophole in the tax code that lets you stay 100% invested in the market and TLH at the same time. You'd still be considered a buy and hold investor while claiming a loss.

This. Some say that diversification is the only "free lunch". I think that is wrong. Because TLH'ing with mutual funds also provides a "free lunch".

If you do it right, you can maintain all the benefits of a "buy and hold" strategy--staying in the market and staying with your asset allocation, but with substantial tax benefits that translate into hard cash. It's all upside and no downside.
This is true, as long as you are accounting for the less-good side of TLH that is hardly ever discussed: the cost basis drops. Savvy investors are certainly considering this in their long term TLH plans, but novices might lose sight of it. There are two points to consider:

1) You have to remain focused on total after-tax returns. TLH is just an intermediate step along the way to finally spending the investment, and should be used with some planning. It's sometimes easy to forget that the lowered basis could partially offset other benefits of TLH.

2) Just as is the case with tax-deferral, on the day you TLH you will probably not know exactly how much the strategy will ultimately benefit you. To some extent, that will be dependent on future tax rates and structures, and your own personal situation at that future point in time. Those are most definitely not known now with precision.

Sure, claiming a loss and reducing income tax now at the expense of capital gains taxes later is a positive move (as far as we know now ;-)). And shares with huge capital gains can be given away or left to heirs, erasing the effect of a lowered cost basis. But many of us will eventually liquidate and spend appreciated shares, and the increased capital gains taxes then will partially offset the loss claimed now.
You are 100% correct on this. But on average, investors who TLH should come out way ahead, particularly if they invest the TLH "bonus" they receive.

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yukonjack
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Re: Help with Tax Loss Harvesting

Post by yukonjack » Tue Feb 13, 2018 5:12 pm

Good Listener wrote:
Sun Feb 11, 2018 6:06 pm
I thought, maybe wrongly, that this might be a wash sale because he bought the second set of shares within 30 days of the planned sale. Or would that be only if OP sold the 1st lot and held the 2nd but he/she is selling both so it's ok?
I initially thought this as well but I believe the reason it’s not a wash sale is because invstar sold all the shares purchased within 30 days of the TLH sale. Had he left part of the shares purchased in the previous 30 days it would have been a wash sale.

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Mar 25, 2018 11:34 am

So I have exchanged all the funds again with VTSAX from VLCAX (after more than 30 days of previous TLH as explained in this post). Below is the screenshot from my "Realized Gains & Losses" for this taxable account. From this, can I assume that I will be able to report 2566.85 towards losses OR am I expecting too much?

Thanks.

Image

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Earl Lemongrab
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Re: Help with Tax Loss Harvesting

Post by Earl Lemongrab » Sun Mar 25, 2018 2:59 pm

Yes, that's what it means. Keep going, you at least want to get to 3k.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

travellight
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Re: Help with Tax Loss Harvesting

Post by travellight » Sun Mar 25, 2018 3:41 pm

I am just learning about tlh. Can this be done in all accounts, such as taxable, Roth IRA, and 401(k)?

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Earl Lemongrab
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Re: Help with Tax Loss Harvesting

Post by Earl Lemongrab » Sun Mar 25, 2018 6:09 pm

travellight wrote:
Sun Mar 25, 2018 3:41 pm
I am just learning about tlh. Can this be done in all accounts, such as taxable, Roth IRA, and 401(k)?
Not in tax-advantaged accounts. There are no capital gains or losses there. That's why you want to avoid wash sales in there because you can't transfer the basis.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

invstar
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Re: Help with Tax Loss Harvesting

Post by invstar » Sun Mar 25, 2018 7:22 pm

Thanks Earl!
Earl Lemongrab wrote:
Sun Mar 25, 2018 2:59 pm
Yes, that's what it means. Keep going, you at least want to get to 3k.

travellight
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Re: Help with Tax Loss Harvesting

Post by travellight » Mon Mar 26, 2018 9:29 am

Earl Lemongrab wrote:
Sun Mar 25, 2018 6:09 pm
travellight wrote:
Sun Mar 25, 2018 3:41 pm
I am just learning about tlh. Can this be done in all accounts, such as taxable, Roth IRA, and 401(k)?
Not in tax-advantaged accounts. There are no capital gains or losses there. That's why you want to avoid wash sales in there because you can't transfer the basis.
Thanks Earl!

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