How and when do you decide to do Tax Loss Harvesting?

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Gamma Ray
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How and when do you decide to do Tax Loss Harvesting?

Post by Gamma Ray » Sat Aug 26, 2017 1:39 am

I only started investing in taxable account last month. It's all on VOO.
I see that it's down by about -1.5%.

If I sell this at loss and buy something else like Total Market Index, that loss will be a loss that I can use to cover the gains later on, but doesn't that loss help me cover the gains if the Total Market recovers my 1.5% loss? That exactly is the point of TLH?

Let's say Day 1 I buy $10k worth of shares of a fund, Day 100 it's now worth $5k, I sell it, buy another/similar fund, at $5k, it goes up to $11k by end of the year. I have $5k in tax loss and $6k in gains. Doesn't IRS consider the $6k gain after $5k losses, so overall $1k gain, same as if I didn't sell and buy the similar stock, Isn't it?

If I understand it correctly, it only works if the fund doesn't recover above my original purchase, the difference can be deducted from my gains for the year?

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by MotoTrojan » Sat Aug 26, 2017 1:45 am

Gamma Ray wrote:
Sat Aug 26, 2017 1:39 am
I only started investing in taxable account last month. It's all on VOO.
I see that it's down by about -1.5%.

If I sell this at loss and buy something else like Total Market Index, that loss will be a loss that I can use to cover the gains later on, but doesn't that loss help me cover the gains if the Total Market recovers my 1.5% loss? That exactly is the point of TLH?

Let's say Day 1 I buy $10k worth of shares of a fund, Day 100 it's now worth $5k, I sell it, buy another/similar fund, at $5k, it goes up to $11k by end of the year. I have $5k in tax loss and $6k in gains. Doesn't IRS consider the $6k gain after $5k losses, so overall $1k gain, same as if I didn't sell and buy the similar stock, Isn't it?

If I understand it correctly, it only works if the fund doesn't recover above my original purchase, the difference can be deducted from my gains for the year?
Yup, you are deferring the taxes rather than outright eliminating them (unless you have some room in your tax-free Roth, then you could buy equities in that). But while it is down, you can also get $3000 deducted from you income tax every year, and invest that deduction, thus over time compounding more gains. Also that $3000 deduction will come off of your marginal tax-rate, while the taxes after the stock (hopefully) rebounds/grows are likely to be long-term capital gains, assuming a >1-year hold. I believe that is the biggest boost.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by daveydoo » Sat Aug 26, 2017 2:06 am

Gamma Ray wrote:
Sat Aug 26, 2017 1:39 am

If I understand it correctly, it only works if the fund doesn't recover above my original purchase, the difference can be deducted from my gains for the year?
Pretend you have more than one fund. Something will almost always be spinning off capital gains (even in a down market) and you can use your TLH loss to offset that. And you can carry the loss forward if that's not the case this year. It's a lot harder to conceptualize if you have just the one fund. And with just one fund, it's best to be careful about dividend reinvesting to avoid a (partial) wash sale. And every time I toggle off the dividend reinvest feature for this reason, I generally forget to toggle it back on...

Others here have rules of thumb for when it's worthwhile to TLH, or they may carefully track cost basis for every purchase and dividend reinvestment so they can pounce on even a modest downturn. Some will pull the trigger for $10 whereas some wait 'til it's $1000. I envy those people :happy .
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Re: How and when do you decide to do Tax Loss Harvesting?

Post by chuppi » Sat Aug 26, 2017 5:21 am

daveydoo wrote:
Sat Aug 26, 2017 2:06 am
Others here have rules of thumb for when it's worthwhile to TLH, or they may carefully track cost basis for every purchase and dividend reinvestment so they can pounce on even a modest downturn. Some will pull the trigger for $10 whereas some wait 'til it's $1000. I envy those people :happy .
I have never done this mainly because most of my after-tax investments came after the recession and never thought there are opportunities. Should one constantly look for opportunities to tax loss harvest? Where can I find more information on TLH strategies?

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Nestegg_User » Sat Aug 26, 2017 5:52 am

One reason for waiting until somewhat higher levels of TLH is the frictional costs.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by goingup » Sat Aug 26, 2017 10:15 am

GammaRay-
I've TLH'd a few times but I'm no expert. Here's my suggestion for your situation.

*You would TLH your losses in VOO if they were significant enough to do so. You have to determine your own thresh hold.

*You'd sell your losing VOO shares and "realize" the loss. Your broker will record that transaction as a short-term or long-term loss. The idea is to then immediately invest in a similar fund such as VTI, and thereby maintain your same AA.

*The government shares in your realized loss by allowing you to deduct this loss from future realized gains and/or your taxable income (up to $3K).

That's it. Any unrealized future gains in the VTI you hold now aren't particularly relevant to the TLH procedure you just completed. My suggestion is to not to overdo the TLHing. It's just a tax tool not an investing strategy.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Artsdoctor » Sat Aug 26, 2017 10:45 am

Depending on the investor, I would argue that it is not just a tax tool but an investment strategy.

It's only partially true that you'd be delaying capital gains tax by tax-loss harvesting. You will diminish the basis, but if you're charitably inclined, you can easily donate those massively appreciated shares in the future--and pay no capital gains tax.

Also, you'd be getting a $3,000 loss each and every year, which means you'd have more money in your pocket--to invest, if you're smart.

Lastly, by having carryover losses, you'd be able to rebalance in the future without having to worry about paying capital gains since you can offset those gains with your carryover losses--which is an important investment strategy.

And parenthetically, if you find that you're going to be investing for legacy purposes, the cost basis is reset at the time of death. It's also worth noting that the cost basis is reset when a spouse dies if it's a joint account (the percentage will depend on whether or not you're in a community property state).

I tax-loss harvested throughout the 2008-2009 meltdown and have carryover losses which aren't even close to being used up, and I have no regrets.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Gamma Ray » Sat Aug 26, 2017 12:12 pm

Thanks for the replies, since I only one taxable account (all my other savings go to wife's and my retirement accounts) I don't really have a lot going on. Like Artsdoctor said TLH is most beneficial if you are holding a long term investment during a financial downturn, so even if it doesn't recover right away, all those losses can help offset future gains for many years.

When I sell my losing VOO and buy like VTI, I really don't need to go back to VOO right on day 32, I can just let it stay, but when (if) VTI keeps losing and I am down another 2% by end of the year, I can sell VTI and buy VOO so I have another round of losses.

Reason I asked when/how, was because I wanted to know if people sell as soon as there is some (I guess amount depends on each person) loss, and then sell again when there is more loss, or do they just wait and sell it when there is enough loss that's worth for them? Because if you sell it as soon as you see any kind of loss, it's no different than waiting 30 more days for even lower market. But- If the market is going down, both VTI and VOO will be going down anyway, so at least you grab some losses by selling as soon as it's down a little?
Say something like $200 loss today, maybe another $200 in 32 days by time we sell VTI and buy VOO back we are still at loss, then we can claim $400 loss on this year's returns? I hope I am not confusing anyone, if this doesn't make sense.

Thanks again everyone.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by MotoTrojan » Sat Aug 26, 2017 1:31 pm

Gamma Ray wrote:
Sat Aug 26, 2017 12:12 pm
Thanks for the replies, since I only one taxable account (all my other savings go to wife's and my retirement accounts) I don't really have a lot going on. Like Artsdoctor said TLH is most beneficial if you are holding a long term investment during a financial downturn, so even if it doesn't recover right away, all those losses can help offset future gains for many years.

When I sell my losing VOO and buy like VTI, I really don't need to go back to VOO right on day 32, I can just let it stay, but when (if) VTI keeps losing and I am down another 2% by end of the year, I can sell VTI and buy VOO so I have another round of losses.

Reason I asked when/how, was because I wanted to know if people sell as soon as there is some (I guess amount depends on each person) loss, and then sell again when there is more loss, or do they just wait and sell it when there is enough loss that's worth for them? Because if you sell it as soon as you see any kind of loss, it's no different than waiting 30 more days for even lower market. But- If the market is going down, both VTI and VOO will be going down anyway, so at least you grab some losses by selling as soon as it's down a little?
Say something like $200 loss today, maybe another $200 in 32 days by time we sell VTI and buy VOO back we are still at loss, then we can claim $400 loss on this year's returns? I hope I am not confusing anyone, if this doesn't make sense.

Thanks again everyone.
You could also introduce a 3rd fund like VV and not have to wait that 30 days if the market continues down sharply. It really is dependent on your portfolio size though and how involved you want to be. I would recommend you write a specific plan in your IPS.

For me, I selected a $500 loss threshold for now, but state that I can harvest a loss of any size in December, at my discretion. I also allow myself to harvest a loss of any size, if it allows me to transition back to my "core fund".

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by TomatoTomahto » Sat Aug 26, 2017 1:56 pm

Fwiw, I'm a bit of an outlier around here, but I don't TLH short term losses. That's a bit too market timey seeming for me.

Tbh, I don't TLH long term losses too often either, because I don't have many.

:sharebeer

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Artsdoctor » Sat Aug 26, 2017 4:30 pm

^ One way of looking at it, though. Tax-loss harvesting would not be considered market timing because you've not changed your asset allocation at all. If you're selling your S&P 500 fund at a loss and buying your Large Cap fund that same day, you've never been out of the market.

The other way of tax-loss harvesting (selling and waiting 30 days to get back in), is still a TLH strategy that a lot of people use, but you're out of the market for a month. A lot can happen in that month so I personally do not do that.

The amount of loss is a personal decision. Some would indeed TLH for a $200 loss. I would generally do it for more of a loss but everyone has his or her own threshold.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by randomizer » Sat Aug 26, 2017 4:34 pm

I haven't seen any tax loss harvesting opportunities for almost two years now. But they will come, I don't doubt it.

Investing it boring. Darn boring.
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Re: How and when do you decide to do Tax Loss Harvesting?

Post by ram » Sat Aug 26, 2017 5:25 pm

There were significant TLH opportunities in Feb 2016. I put in some effort to make sure I have at least 3000 of loss by 12/31 of each year. Typically I will not TLH for <1000.
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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Finance-MD » Sat Aug 26, 2017 7:33 pm

Let's pretend I want to put a fixed amount every month into vanguard total us stock market vtsax.

Does anyone know the *least* I would need to invest monthly to be able to TLH at least the $3000 per year? Let's assume that a TLH is done whenever it's down by 1%

In general I want to have my stocks in protected accounts and municipal bonds in taxable, but I'll definitely put in enough stocks into taxable to get the $3000 TLH.

Thanks!

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by daveydoo » Sat Aug 26, 2017 7:51 pm

Finance-MD wrote:
Sat Aug 26, 2017 7:33 pm
Does anyone know the *least* I would need to invest monthly to be able to TLH at least the $3000 per year? Let's assume that a TLH is done whenever it's down by 1%
Depends on how bad an investor you are :D ; it would seem to depend entirely upon what the market does. It's not really a function of your rate of investment. If you invest a lot or a little and the market climbs slowly and steadily, then there is no opportunity for TLH. You need a loss to harvest a loss. BH livesoft has had some great posts on this.
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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Finance-MD » Sat Aug 26, 2017 8:30 pm

There are intrayear losses every year due to volatility.
if it is steadily climbing, you are getting higher basis with new contributions, which increases likelihood of being able to TLH something. If I just lump sum at the beginning, then I may never get to TLH those shares.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Gamma Ray » Sun Aug 27, 2017 1:08 am

Finance-MD wrote:
Sat Aug 26, 2017 7:33 pm
Let's pretend I want to put a fixed amount every month into vanguard total us stock market vtsax.

Does anyone know the *least* I would need to invest monthly to be able to TLH at least the $3000 per year? Let's assume that a TLH is done whenever it's down by 1%

In general I want to have my stocks in protected accounts and municipal bonds in taxable, but I'll definitely put in enough stocks into taxable to get the $3000 TLH.

Thanks!
I think it's a lot more difficult to TLH if you put fixed amount every week or every month, unless it's down by the time you put your next contribution to your taxable account.

I opened a static account (just a lump sum of about $16,000 less than 2 months ago, and it's down by about $200).
Since I am not adding anything to it, it's much easier to see how it's doing, although you could still see by help of VG's detailed table view, just not as "clean" when you are not adding anything to the account. I really don't have much in capital gains, so I figured this $200 can help save me some taxes out of my interest income/etc. $200 is $200, right?

TomatoTomahto wrote:
Sat Aug 26, 2017 1:56 pm
Fwiw, I'm a bit of an outlier around here, but I don't TLH short term losses. That's a bit too market timey seeming for me.

Tbh, I don't TLH long term losses too often either, because I don't have many.

:sharebeer
randomizer wrote:
Sat Aug 26, 2017 4:34 pm
I haven't seen any tax loss harvesting opportunities for almost two years now. But they will come, I don't doubt it.

Investing it boring. Darn boring.
You guys are lucky! Most of us are since market is up in 2 years, and honestly in some days you may have had losses, but never realized since market went right back up next day, which brings me to my next question (and also why I bought ETF). I assume ETF if sold/bought immediately, whereas Mutual Fund (even if it's same) sold and bought at the end of the day. Do you always give your instruction to sell and buy the other fund after market closes so you don't get stuck selling something that goes up by end of the day?

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Finance-MD » Sun Aug 27, 2017 9:22 am

With a stock market climbing, there are still opportunities to TLH 'soon' after initial purchase due to volatility. Once those shares get older, with a climbing market, it's harder to TLH.

That's why i ask about doing monthnly contributions. There are always new shares.

I use specID and TLH those with losses.

For example, I put in about $50k into VTSAX over the past month in 2 installments. The market was down late last week. I had almost $1000 in losses from this. These shares were down almost 2%.

On Monday or Tuesday this week I looked At 3:45 Eastern time and saw that VTI hadn't gone up more than 1% during the day, so I was comfortable I still had a loss and executed a trade order for large cap VLCAX.

I'd like there to be a smoother way to do this with mutual funds.
What was nice is the new shares were in by tomorrow.

I didn't have to worry about a margin account or a bid-ask spread.

So I harvested nearly $1000 in an upmarket by TLHing soon after purchase.

It also makes me wonder if i should buy the alternate fund VLCAX each time I make a new contribution and TLH into the primary fund VTSAX which will be purchased at a relative low and less likely to be TLH'ed in the future.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by IlliniDave » Sun Aug 27, 2017 10:35 am

I keep it simple. I check everything in December each year and if I can realize a loss without triggering a wash sale or fouling up my overall allocation strategy, I will generally do so. The exception would be when something sees a sharp loss, say maybe 10% or more. In that case I might look to TLH at other times of the year. I actually find the process to be a bit of a pain (having to maintain "TLH partner funds" and worry about distributions that get auto invested in my 401(k), etc.) but it often pays pretty well when you look at it from a "by the hour" perspective.
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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Gamma Ray » Sun Aug 27, 2017 6:47 pm

Finance-MD wrote:
Sun Aug 27, 2017 9:22 am

I use specID and TLH those with losses.
I just read about specID on VG, I had no idea they offered that, but it looks like a complicated way, but I really like what I read. So it basically sets each purchase as separate fund/allocation (although it looks like one investment) and you can keep record of which purchase is up which one is down. Is that what it does? So your VOO purchase of X shares on 7/1 is down today but your VOO purchase of Y shares on 2/1 is up. So when you sell, you can select to sell the X shares without touching Y shares to balance the gains?
IlliniDave wrote:
Sun Aug 27, 2017 10:35 am
I keep it simple. I check everything in December each year and if I can realize a loss without triggering a wash sale or fouling up my overall allocation strategy, I will generally do so. The exception would be when something sees a sharp loss, say maybe 10% or more. In that case I might look to TLH at other times of the year. I actually find the process to be a bit of a pain (having to maintain "TLH partner funds" and worry about distributions that get auto invested in my 401(k), etc.) but it often pays pretty well when you look at it from a "by the hour" perspective.

Is this what most people do? Or is there any disadvantages to doing it as we see losses other than potentially messing up the AA (although that's hard to mess if one is investing in simple indexes). I know some people watch the stocks continuously, but I think that's too much, if there is a sharp drop in market everyone would know about it anyway.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by IlliniDave » Sun Aug 27, 2017 7:52 pm

Gamma Ray wrote:
Sun Aug 27, 2017 6:47 pm

IlliniDave wrote:
Sun Aug 27, 2017 10:35 am
I keep it simple. I check everything in December each year and if I can realize a loss without triggering a wash sale or fouling up my overall allocation strategy, I will generally do so. The exception would be when something sees a sharp loss, say maybe 10% or more. In that case I might look to TLH at other times of the year. I actually find the process to be a bit of a pain (having to maintain "TLH partner funds" and worry about distributions that get auto invested in my 401(k), etc.) but it often pays pretty well when you look at it from a "by the hour" perspective.

Is this what most people do? Or is there any disadvantages to doing it as we see losses other than potentially messing up the AA (although that's hard to mess if one is investing in simple indexes). I know some people watch the stocks continuously, but I think that's too much, if there is a sharp drop in market everyone would know about it anyway.
I can't really say what most people do. You touched on part of the reason I've fallen into the pattern I have--I just don't invest time checking cost basis vs current price on an ongoing basis. I don't know that there's a disadvantage to doing it on an ongoing basis other than you have to be more aware of wash rules and such (sell A at a loss and buy B, then B goes down and you sell B back to A, then A goes down again, etc.). I'd guess I don't do any loss harvesting more years than I do.
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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Finance-MD » Sun Aug 27, 2017 9:28 pm

Gamma Ray wrote:
Sun Aug 27, 2017 6:47 pm
Finance-MD wrote:
Sun Aug 27, 2017 9:22 am

I use specID and TLH those with losses.
I just read about specID on VG, I had no idea they offered that, but it looks like a complicated way, but I really like what I read. So it basically sets each purchase as separate fund/allocation (although it looks like one investment) and you can keep record of which purchase is up which one is down. Is that what it does? So your VOO purchase of X shares on 7/1 is down today but your VOO purchase of Y shares on 2/1 is up. So when you sell, you can select to sell the X shares without touching Y shares to balance the gains?

Yep, when you go to the cost basis section, you can see each fund and your overall unrealized gains or losses.

But when you click on the fund, it will show you the gains or losses of each 'tax lot' (purchase).

When you sell, you can choose which shares to sell so that you are only selling the losers.

You'll also need to sell any of the same fund purchased within the past 30 days to avoid a wash sale on those shares.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by TomatoTomahto » Sun Aug 27, 2017 9:37 pm

One of the nice features of Quicken is that you can have it pick your lots for you, based on criteria (e.g., "Minimize Gain"). This allows you to examine different scenarios easily.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by whodidntante » Sun Aug 27, 2017 9:44 pm

I start to think about it when I can harvest a few hundred bucks in losses. We are in the midst of a long bull market and I'm dubious that a downturn will persist very long, so I grab the loss while I can. In a deep bear market I would be a little more patient.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by 2015 » Mon Aug 28, 2017 1:51 pm

I engaged in TGH at the beginning of the year in order to migrate to a 3 fund PF. Despite any volatility this year, I have been unable to TLH since as I've had no losses. I'm not interested enough to check for losses on any set schedule, even though I've checked after coming across threads discussing current volatility. I'll probably keep up my irregular schedule and engage in hard core TLH during future corrections.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Gamma Ray » Mon Jun 11, 2018 1:11 am

I just realized we may have a wash sale problem if we don't cross check our retirement portfolio and funds while harvesting losses in taxable accounts.

Does anyone know if TLH triggers wash sale if the TAXABLE account fund we sell at a loss is a part of our Target Fund in our retirement account and being bought regularly potentially shortly after TLH?

For example I sold VOO for losses and bought VTI in my taxable account.
In the meantime regular investments within VFORX includes weekly purchases of VTSMX in my traditional IRA.

Any risks with above? Or are these safe?
Thank you

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by MrJones » Mon Jun 11, 2018 1:43 am

Gamma Ray wrote:
Mon Jun 11, 2018 1:11 am
I just realized we may have a wash sale problem if we don't cross check our retirement portfolio and funds while harvesting losses in taxable accounts.

Does anyone know if TLH triggers wash sale if the TAXABLE account fund we sell at a loss is a part of our Target Fund in our retirement account and being bought regularly potentially shortly after TLH?

For example I sold VOO for losses and bought VTI in my taxable account.
In the meantime regular investments within VFORX includes weekly purchases of VTSMX in my traditional IRA.

Any risks with above? Or are these safe?
Thank you
Search for IRA or Roth here:
https://www.bogleheads.org/wiki/Wash_sale

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Artsdoctor » Mon Jun 11, 2018 7:57 am

Gamma Ray wrote:
Mon Jun 11, 2018 1:11 am
I just realized we may have a wash sale problem if we don't cross check our retirement portfolio and funds while harvesting losses in taxable accounts.

Does anyone know if TLH triggers wash sale if the TAXABLE account fund we sell at a loss is a part of our Target Fund in our retirement account and being bought regularly potentially shortly after TLH?

For example I sold VOO for losses and bought VTI in my taxable account.
In the meantime regular investments within VFORX includes weekly purchases of VTSMX in my traditional IRA.

Any risks with above? Or are these safe?
Thank you
There is no problem here. If you sell Total Market and buy Balanced Fund anywhere, for example, there is no wash sale, even if it's in the same taxable account. In your case, you're even further removed.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by michaeljc70 » Mon Jun 11, 2018 10:08 am

The amount of talk on these forums of TLH after a 9 year bull run suprises me. I did capital gains harvesting last year due to being in a lower tax bracket.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by livesoft » Mon Jun 11, 2018 10:09 am

michaeljc70 wrote:
Mon Jun 11, 2018 10:08 am
The amount of talk on these forums of TLH after a 9 year bull run suprises me. I did capital gains harvesting last year due to being in a lower tax bracket.
Frankly, I'm surprised, too.
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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Doc » Mon Jun 11, 2018 10:20 am

michaeljc70 wrote:
Mon Jun 11, 2018 10:08 am
The amount of talk on these forums of TLH after a 9 year bull run suprises me.
It's not been a bull market in bonds.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by michaeljc70 » Mon Jun 11, 2018 10:30 am

Doc wrote:
Mon Jun 11, 2018 10:20 am
michaeljc70 wrote:
Mon Jun 11, 2018 10:08 am
The amount of talk on these forums of TLH after a 9 year bull run suprises me.
It's not been a bull market in bonds.
They were up big in 2007-2008 and 2010-2011 (of course it depends what bonds you look at... I'm looking at long treasuries). They had a couple down years, but none big since 2009.

TBM is down for 1 year (around 1 percent), but up for 3,5 and 10 years.

I also don't keep bonds in taxable accounts.
Last edited by michaeljc70 on Mon Jun 11, 2018 10:48 am, edited 1 time in total.

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Gamma Ray
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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Gamma Ray » Mon Jun 11, 2018 10:39 am

Artsdoctor wrote:
Mon Jun 11, 2018 7:57 am
There is no problem here. If you sell Total Market and buy Balanced Fund anywhere, for example, there is no wash sale, even if it's in the same taxable account. In your case, you're even further removed.


Thanks. So my purchase of a balanced fund with VG does not really involve individual purchases of each fund within that fund, instead it's simply considered another fund in the eyes of IRS for TLH purposes? I suppose it's not just the name/what they call it, but the composition of the fund. I suppose VG can't just make a fund that's 99% total market 1% international total market, and call it something else fund since it's majority if same as what you just sold (Total market ETF)?
livesoft wrote:
Mon Jun 11, 2018 10:09 am
michaeljc70 wrote:
Mon Jun 11, 2018 10:08 am
The amount of talk on these forums of TLH after a 9 year bull run suprises me. I did capital gains harvesting last year due to being in a lower tax bracket.
Frankly, I'm surprised, too.
I don't know about others but I was able to TLH little over $1000 earlier this year on an account I opened last year. Not sure if there are really a big number of discussions on TLH but it all depends on how much you are down and is it worth selling/buying to harvest those losses. Without discussions on this forum, I probably would not attempt that.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by H-Town » Mon Jun 11, 2018 10:47 am

Gamma Ray wrote:
Sat Aug 26, 2017 1:39 am
I only started investing in taxable account last month. It's all on VOO.
I see that it's down by about -1.5%.

If I sell this at loss and buy something else like Total Market Index, that loss will be a loss that I can use to cover the gains later on, but doesn't that loss help me cover the gains if the Total Market recovers my 1.5% loss? That exactly is the point of TLH?

Let's say Day 1 I buy $10k worth of shares of a fund, Day 100 it's now worth $5k, I sell it, buy another/similar fund, at $5k, it goes up to $11k by end of the year. I have $5k in tax loss and $6k in gains. Doesn't IRS consider the $6k gain after $5k losses, so overall $1k gain, same as if I didn't sell and buy the similar stock, Isn't it?

If I understand it correctly, it only works if the fund doesn't recover above my original purchase, the difference can be deducted from my gains for the year?
Learn those terms:
1. Unrealized gain / loss
2. Realized gain / loss
3. Dividends
4. Taxable capital gain distribution

And learn when you have taxable gain/loss during the year.

In your example, Do you plan sell everything at the end and recognize 6k gain? Or do you think the IRS will grab your wallet whenever your portfolio have unrealized gain?

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Doc » Mon Jun 11, 2018 10:49 am

michaeljc70 wrote:
Mon Jun 11, 2018 10:30 am
I also don't keep bonds in taxable accounts.
Some bonds are very tax-efficient. Notice the short bond funds at the top of the list.

From the Bogleheads Wiki:
Image

https://www.bogleheads.org/wiki/Tax-eff ... _placement
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by michaeljc70 » Mon Jun 11, 2018 11:21 am

Doc wrote:
Mon Jun 11, 2018 10:49 am
michaeljc70 wrote:
Mon Jun 11, 2018 10:30 am
I also don't keep bonds in taxable accounts.
Some bonds are very tax-efficient. Notice the short bond funds at the top of the list.

From the Bogleheads Wiki:
Image

https://www.bogleheads.org/wiki/Tax-eff ... _placement
Those short term bond funds would be the ones I would expect least to lose much value now.

I am sure the thread is helpful. I am not saying it isn't a legitimate/useful topic at all. I was merely commenting that generally there are more posts/threads on TLH than I would expect given the market in the last several years.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by peterinjapan » Mon Jun 11, 2018 10:01 pm

Because I live in Japan, I can't carry over losses, so I always make sure I have $1000 of profit since capital gains are my "favorite" tax to pay. Last year I moved out of some longtime positions so it was a great deal more than $1000.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by peterinjapan » Mon Jun 11, 2018 10:04 pm

Doc wrote:
Mon Jun 11, 2018 10:49 am
michaeljc70 wrote:
Mon Jun 11, 2018 10:30 am
I also don't keep bonds in taxable accounts.
Some bonds are very tax-efficient. Notice the short bond funds at the top of the list.

https://www.bogleheads.org/wiki/Tax-eff ... _placement
It's interesting when you live in another tax region and have to juggle two different systems. In Japan, they always charge a flat 20% on all profits (long or short term, they don't care) and all distributions (they don't know what qualified and unqualified are). Doesn't really help me since I have to declare taxes in both places, but if I were a Japanese citizen I could make a killing in REITs and other high yield stuff.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by 2015 » Tue Jun 12, 2018 8:09 pm

michaeljc70 wrote:
Mon Jun 11, 2018 10:08 am
The amount of talk on these forums of TLH after a 9 year bull run suprises me. I did capital gains harvesting last year due to being in a lower tax bracket.
I did CG harvesting last year, too. As to TLH, poised and waiting...

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by tmcc » Wed Jun 13, 2018 7:19 pm

so lets say someone is at vanguard.

could you flip from their total market ETF to the mutual fund without triggering a wash sale?

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Doc » Wed Jun 13, 2018 7:28 pm

tmcc wrote:
Wed Jun 13, 2018 7:19 pm
so lets say someone is at vanguard.

could you flip from their total market ETF to the mutual fund without triggering a wash sale? I
Probably not. There is no tax consequence from going from investor share to admiral. So I would assume that the same would apply here. I believe you would have a wash sale and your "loss" would adjust the basis of your new position.

Just go to an S&P 500 for 30 days and then reverse the trade. Why start an argument with the IRS when you can easily avoid the problem?
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by tmcc » Wed Jun 13, 2018 7:32 pm

Doc wrote:
Wed Jun 13, 2018 7:28 pm
tmcc wrote:
Wed Jun 13, 2018 7:19 pm
so lets say someone is at vanguard.

could you flip from their total market ETF to the mutual fund without triggering a wash sale? I
Probably not. There is no tax consequence from going from investor share to admiral. So I would assume that the same would apply here. I believe you would have a wash sale and your "loss" would adjust the basis of your new position.

Just go to an S&P 500 for 30 days and then reverse the trade. Why start an argument with the IRS when you can easily avoid the problem?
to avoid the commission of buying a non-vanguard product. yes, i am that cheap :P

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by MotoTrojan » Wed Jun 13, 2018 8:15 pm

TomatoTomahto wrote:
Sat Aug 26, 2017 1:56 pm
Fwiw, I'm a bit of an outlier around here, but I don't TLH short term losses. That's a bit too market timey seeming for me.

Tbh, I don't TLH long term losses too often either, because I don't have many.

:sharebeer
I know this is an older post (but thread was revived) but what is your rationale? A short-term loss is the best case if for some reason you needed to sell a short-term gain (sounds like you wouldn't) but either way you can use it for a long-term gain, or for the $3K/yr write-off.

I would think there is no other difference in practice, and you are more likely to get a short-term loss than a long-term one. I can understand if you have a large portfolio and just don't want to bother with smaller recent contributions, but your distinction of ST vs LT seems strange.

If you lump-summed a sizable amount and the market crashed and rebounded within a year, why not get some tax benefits?

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by michaeljc70 » Wed Jun 13, 2018 8:30 pm

tmcc wrote:
Wed Jun 13, 2018 7:32 pm
Doc wrote:
Wed Jun 13, 2018 7:28 pm
tmcc wrote:
Wed Jun 13, 2018 7:19 pm
so lets say someone is at vanguard.

could you flip from their total market ETF to the mutual fund without triggering a wash sale? I
Probably not. There is no tax consequence from going from investor share to admiral. So I would assume that the same would apply here. I believe you would have a wash sale and your "loss" would adjust the basis of your new position.

Just go to an S&P 500 for 30 days and then reverse the trade. Why start an argument with the IRS when you can easily avoid the problem?
to avoid the commission of buying a non-vanguard product. yes, i am that cheap :P
What is it, $5? Versus thousands if the IRS goes after you....

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by TomatoTomahto » Wed Jun 13, 2018 8:52 pm

MotoTrojan wrote:
Wed Jun 13, 2018 8:15 pm
TomatoTomahto wrote:
Sat Aug 26, 2017 1:56 pm
Fwiw, I'm a bit of an outlier around here, but I don't TLH short term losses. That's a bit too market timey seeming for me.

Tbh, I don't TLH long term losses too often either, because I don't have many.

:sharebeer
I know this is an older post (but thread was revived) but what is your rationale? A short-term loss is the best case if for some reason you needed to sell a short-term gain (sounds like you wouldn't) but either way you can use it for a long-term gain, or for the $3K/yr write-off.

I would think there is no other difference in practice, and you are more likely to get a short-term loss than a long-term one. I can understand if you have a large portfolio and just don't want to bother with smaller recent contributions, but your distinction of ST vs LT seems strange.

If you lump-summed a sizable amount and the market crashed and rebounded within a year, why not get some tax benefits?
The short answer is that I'm lazy.

A longer answer is that I recently needed to raise cash, because I found the hoops that a mortgage company wanted me to jump through onerous. So, in raising cash for a house purchase, I pretty much found every loss we had in our portfolio.

The answer that might get some snark here is that it feels too much like a job. The markets have been good to us. I hope that my kids enjoy the stepped up basis.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by wootwoot » Wed Jun 13, 2018 8:57 pm

I don't decide when to TLH, my roboadvisor does :D

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by wootwoot » Wed Jun 13, 2018 9:28 pm

michaeljc70 wrote:
Mon Jun 11, 2018 10:08 am
The amount of talk on these forums of TLH after a 9 year bull run suprises me. I did capital gains harvesting last year due to being in a lower tax bracket.
Did you stop contributing new money? Newer investments are the best opportunity for TLH.

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Re: How and when do you decide to do Tax Loss Harvesting?

Post by Gamma Ray » Wed Jun 13, 2018 11:24 pm

wootwoot wrote:
Wed Jun 13, 2018 8:57 pm
I don't decide when to TLH, my roboadvisor does :D

Who do you invest with? Betterment?

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