tax loss worthwhile?

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vest74
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tax loss worthwhile?

Post by vest74 » Fri Jun 08, 2018 10:45 pm

Wondering if i sold some Total Bond for a tax loss, if it can be claimed against Long term Cap gains even if i am in a low enough Tax Bracket that i do not pay any taxes on LTCGains? all is within a joint taxable brokerage account

mega317
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Re: tax loss worthwhile?

Post by mega317 » Fri Jun 08, 2018 10:47 pm

Why would you want to do that?!

JoinToday
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Re: tax loss worthwhile?

Post by JoinToday » Fri Jun 08, 2018 11:26 pm

IF you are in a tax bracket where you pay no tax on LTCG, this is the time to be doing tax GAIN harvesting on LTCG, not tax LOSS harvesting on LTCG
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BL
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Re: tax loss worthwhile?

Post by BL » Fri Jun 08, 2018 11:30 pm

Yes, you must do that if you have the gains, even if taxed at 0%. You would do better to not have gains, so you can apply 3k to lower your income, and carry over any additional amounts.

I expect to be in a higher tax bracket later, so will hold off on most TLH until then. (There are pros and cons).

If you want to sell for other than tax reasons, that is probably fine.

vest74
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Re: tax loss worthwhile?

Post by vest74 » Sat Jun 09, 2018 12:00 am

Why would you want to do that?! because I see no use in the fund ( total Bond )anymore and I have like 10K total - might as well put it in Prime and get the 1.8% ..............??

vest74
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Re: tax loss worthwhile?

Post by vest74 » Sat Jun 09, 2018 12:02 am

Sorry, 10K total tax loss though i would only do like 3K TLH a year.......or do it all at once- 1 year?

PFInterest
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Re: tax loss worthwhile?

Post by PFInterest » Sat Jun 09, 2018 12:02 am

vest74 wrote:
Sat Jun 09, 2018 12:00 am
Why would you want to do that?! because I see no use in the fund ( total Bond )anymore and I have like 10K total - might as well put it in Prime and get the 1.8% ..............??
you realize total bond has an SEC yield of 3.1 right?

vest74
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Re: tax loss worthwhile?

Post by vest74 » Sun Jun 10, 2018 12:30 am

what good is 3.1% yield if value keeps going down and may for some time? of course that is a timing issue but..................

livesoft
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Re: tax loss worthwhile?

Post by livesoft » Sun Jun 10, 2018 6:54 am

If you don't want to own VBTLX, then sell it. It is nice that you will not owe additional taxes from selling it.

Your question is not really a tax-loss harvesting question, but more a question about the behavioral finance trap of loss aversion and having a plan and staying the course.
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JW-Retired
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Re: tax loss worthwhile?

Post by JW-Retired » Sun Jun 10, 2018 9:45 am

vest74 wrote:
Fri Jun 08, 2018 10:45 pm
Wondering if i sold some Total Bond for a tax loss, if it can be claimed against Long term Cap gains even if i am in a low enough Tax Bracket that i do not pay any taxes on LTCGains? all is within a joint taxable brokerage account
Not sure what you are getting at but sure, it will be accounted for even it has no effect on your tax this year. Whatever your bracket, in your Sch D & form 8949 tax forms this loss will offset any LTC gains or short term gains that you realize in the year first. If you don't have enough gains of either kind to fully cover the loss, then any excess loss left will go against your other income like wages and taxable interest up to a $3000 max write off per year. If you still have more losses left after this it gets carried over to the following tax years.

The obvious best use of tax losses is against your ordinary income tax rate. Consequently, one should take every opportunity to realize (harvest) losses but not realize any gains, so as to get that $3k per year ordinary income deduction as long as possible.

Some of us still have money in their tax loss bank from selling losers in 2008/09. My own was quite nice for a while but it ran out a couple of years ago. I had one non-index fund that insisted on realizing gains way too often. :annoyed
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https://www.bogleheads.org/wiki/Tax_loss_harvesting
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libralibra
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Re: tax loss worthwhile?

Post by libralibra » Sun Jun 10, 2018 2:29 pm

vest74 wrote:
Sun Jun 10, 2018 12:30 am
what good is 3.1% yield if value keeps going down and may for some time? of course that is a timing issue but..................
If you've decided to sell, then definitely avoid any LT gains this year. Then harvest some ST gains (sell and buy back immediately) and leave 3k loss to offset other income.

UpperNwGuy
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Re: tax loss worthwhile?

Post by UpperNwGuy » Sun Jun 10, 2018 2:54 pm

Sorry to see you giving up on Total Bond so hastily. It is a fine fund and will do quite well over the long haul.

retiredjg
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Re: tax loss worthwhile?

Post by retiredjg » Sun Jun 10, 2018 3:07 pm

vest74 wrote:
Sun Jun 10, 2018 12:30 am
what good is 3.1% yield if value keeps going down and may for some time? of course that is a timing issue but..................
Perhaps you don't realize that bond value goes down as interest rates go up. It is how bonds work. That is what has happened because interest rates have been going up.

But...as interest rates go up, the bonds start paying higher dividends.. Be patient.



My understanding about the harvested losses - you are forced to apply the losses against gains even if you would pay not taxes on the gains. So the losses are wasted. I'm not sure this understanding is correct, but I recall it being discussed some time in the past.

vest74
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Re: tax loss worthwhile?

Post by vest74 » Mon Jun 11, 2018 3:59 pm

"If you've decided to sell, then definitely avoid any LT gains this year. Then harvest some ST gains (sell and buy back immediately) and leave 3k loss to offset other income. So if i have like American Funds throwing off LTCG every year in our taxable joint account, and our Taxable Income Line 41 is under $75,000, no point in trying to offset the American Funds LTCG(roughly 10K/yr) because it is not taxed anyway? :? and the LTCG would not be taxed until our Line 41 is over the "magic number" of roughly $75K? (In 5 years when RMD's start, we might hit the "magic number"?
Thank You

retiredjg
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Re: tax loss worthwhile?

Post by retiredjg » Mon Jun 11, 2018 4:07 pm

I think the magic number is currently $77,200 which is close to but not the same as the top of the 12% tax bracket for a couple. And I think it is line 43 (taxable income), not line 41.

That is my understanding - the losses would be wasted. But that is from a conversation I read at least 2 years ago. I think I'd verify that. I may be remembering it wrong.

vest74
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Re: tax loss worthwhile?

Post by vest74 » Wed Jun 13, 2018 2:10 pm

I believe that to be the case - no tax loss benefit if under that amount :(

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