Here's to Tax Loss Harvesting

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fortyofforty
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Here's to Tax Loss Harvesting

Post by fortyofforty » Sat Feb 09, 2019 8:34 pm

Here's to Tax Loss Harvesting! How wonderful that we are able at least to benefit from declines in the value of our investments. How awesome that we can sell a "loser" and purchase a similar investment vehicle, without much of a hiccup at all in our overall portfolio construction.

Statements are rolling in, and I see that our paper losses are locked in for several years to come. :beer It's like making lemonade when life gives you lemons.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

DeadPoets
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Re: Here's to Tax Loss Harvesting

Post by DeadPoets » Sat Feb 09, 2019 10:23 pm

I can TLH harvest from VTSAX to VFIAX right? Without wash sale.

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fortyofforty
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Re: Here's to Tax Loss Harvesting

Post by fortyofforty » Sat Feb 09, 2019 10:43 pm

DeadPoets wrote:
Sat Feb 09, 2019 10:23 pm
I can TLH harvest from VTSAX to VFIAX right? Without wash sale.
I am not a tax expert, so my opinion is not to be taken as anything more than an educated guess. I believe that, since they track different indices, they would not be considered "substantially identical", but I would consult a tax professional if you're concerned.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

3dream3
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Re: Here's to Tax Loss Harvesting

Post by 3dream3 » Sun Feb 10, 2019 1:30 am

I TLH'd for the very first time last year... well, a couple of times actually. Nice to see that these will be carried over for the next couple of years for us! :sharebeer

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FiveK
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Re: Here's to Tax Loss Harvesting

Post by FiveK » Sun Feb 10, 2019 4:30 am

DeadPoets wrote:
Sat Feb 09, 2019 10:23 pm
I can TLH harvest from VTSAX to VFIAX right? Without wash sale.
Yes.

The Wizard
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Re: Here's to Tax Loss Harvesting

Post by The Wizard » Sun Feb 10, 2019 4:59 am

Whether you have a partial wash sale or not depends on what's going on in your tax-deferred and Roth accounts as well.
Attempting to maintain a simple three-fund portfolio can lead to problems in this case...
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fortyofforty
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Re: Here's to Tax Loss Harvesting

Post by fortyofforty » Sun Feb 10, 2019 7:00 am

The Wizard wrote:
Sun Feb 10, 2019 4:59 am
Whether you have a partial wash sale or not depends on what's going on in your tax-deferred and Roth accounts as well.
Attempting to maintain a simple three-fund portfolio can lead to problems in this case...
And for those with investments in the government's Thrift Savings Plan, it adds another layer of complication if VFIAX is used on the "outside".
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

student
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Re: Here's to Tax Loss Harvesting

Post by student » Sun Feb 10, 2019 7:15 am

DeadPoets wrote:
Sat Feb 09, 2019 10:23 pm
I can TLH harvest from VTSAX to VFIAX right? Without wash sale.
VTSAX has over 3500 stocks and VFIAX has about 500. I think it is safe to say that they are not substantially identical.

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Earl Lemongrab
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Re: Here's to Tax Loss Harvesting

Post by Earl Lemongrab » Sun Feb 10, 2019 2:33 pm

DeadPoets wrote:
Sat Feb 09, 2019 10:23 pm
I can TLH harvest from VTSAX to VFIAX right? Without wash sale.
No one knows. The IRS has issued very little guidance. A common opinion on Bogleheads is that a different index is sufficient, but not everyone agrees.

vk_217
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Re: Here's to Tax Loss Harvesting

Post by vk_217 » Sun Feb 10, 2019 5:58 pm

If I sell blocks of VTSAX that are under a loss,without buying anything in 30 days on either side of buy,does that constitute a TLH? If yes, how would I know that I successfully did a TLH? Does it show up in the yearly statement? 3rd year into investing and I was too scared to TLH so stayed away from it.I tried once with the bond fund but forgot to stop the dividends from reinvesting and ended up with wash sale.Also my 401k and DW's 401K has target date funds,so I thought I can't TLH unless we both make contribution changes to 401k as well while trying to TLH in taxable.
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FiveK
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Re: Here's to Tax Loss Harvesting

Post by FiveK » Sun Feb 10, 2019 6:38 pm

vk_217 wrote:
Sun Feb 10, 2019 5:58 pm
If I sell blocks of VTSAX that are under a loss,without buying anything in 30 days on either side of buy,does that constitute a TLH?
"...without buying anything..." implies that you are market timing.

"...and buy something similar, but not substantially identical (e.g., sell VTSAX and buy VFIAX)..." would be Tax Loss Harvesting.

The difference is whether you stay invested or not.

vk_217
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Re: Here's to Tax Loss Harvesting

Post by vk_217 » Sun Feb 10, 2019 8:57 pm

What about 401k accounts? Do I have to stop contributions to the T Rowe Price Retirement 2045 Fund in the both our 401K accounts for 30 days on either side of the sell vtsax/buy vfiax in taxable?
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FiveK
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Re: Here's to Tax Loss Harvesting

Post by FiveK » Sun Feb 10, 2019 9:24 pm

vk_217 wrote:
Sun Feb 10, 2019 8:57 pm
What about 401k accounts? Do I have to stop contributions to the T Rowe Price Retirement 2045 Fund in the both our 401K accounts for 30 days on either side of the sell vtsax/buy vfiax in taxable?
No, because a target date fund, with it's bond and foreign components, is not even close to "substantially identical" to VTSAX.

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Earl Lemongrab
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Re: Here's to Tax Loss Harvesting

Post by Earl Lemongrab » Sun Feb 10, 2019 10:25 pm

vk_217 wrote:
Sun Feb 10, 2019 8:57 pm
What about 401k accounts? Do I have to stop contributions to the T Rowe Price Retirement 2045 Fund in the both our 401K accounts for 30 days on either side of the sell vtsax/buy vfiax in taxable?
There is significant disagreement as to whether anything in a 401(k) can cause a wash sale. You can search for previous discussions on the matter.

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fortyofforty
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Re: Here's to Tax Loss Harvesting

Post by fortyofforty » Mon Feb 11, 2019 7:11 am

Earl Lemongrab wrote:
Sun Feb 10, 2019 10:25 pm
vk_217 wrote:
Sun Feb 10, 2019 8:57 pm
What about 401k accounts? Do I have to stop contributions to the T Rowe Price Retirement 2045 Fund in the both our 401K accounts for 30 days on either side of the sell vtsax/buy vfiax in taxable?
There is significant disagreement as to whether anything in a 401(k) can cause a wash sale. You can search for previous discussions on the matter.
I lean on the side that it could, so I avoid mirroring my TSP C, S, and I funds on the outside. I never want to be an IRS "test case". I do think the various "target date" retirement funds would not be considered substantially identical to any possible individual component thereof, but, again, it's my opinion.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

vk_217
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Re: Here's to Tax Loss Harvesting

Post by vk_217 » Mon Feb 11, 2019 10:08 am

The ambiguity is the reason why I have avoided to try a TLH.I guess i am out of luck unless I choose index funds from different indices in my taxable to qualify for tlh.
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The Wizard
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Re: Here's to Tax Loss Harvesting

Post by The Wizard » Mon Feb 11, 2019 10:13 am

vk_217 wrote:
Mon Feb 11, 2019 10:08 am
The ambiguity is the reason why I have avoided to try a TLH.I guess i am out of luck unless I choose index funds from different indices in my taxable to qualify for tlh.
I don't think there's much ambiguity, plus it's perfectly legal to have a partial wash sale...
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AlphaPilot
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Re: Here's to Tax Loss Harvesting

Post by AlphaPilot » Mon Feb 11, 2019 11:30 am

If you hold some VTSAX in a 401k but also in a regular taxable account, and want to sell/TLH/Trade in the brokerage but leave alone in the 401k due to the other choices in the 401k, does the bit sold in the regular taxable account count as TLH or since some was held elsewhere....it negates the benefit of TLH as a whole?

The Wizard
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Re: Here's to Tax Loss Harvesting

Post by The Wizard » Mon Feb 11, 2019 11:37 am

AlphaPilot wrote:
Mon Feb 11, 2019 11:30 am
If you hold some VTSAX in a 401k but also in a regular taxable account, and want to sell/TLH/Trade in the brokerage but leave alone in the 401k due to the other choices in the 401k, does the bit sold in the regular taxable account count as TLH or since some was held elsewhere....it negates the benefit of TLH as a whole?
No, assuming you didn't buy more in 401k in that timeframe...
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AlphaPilot
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Re: Here's to Tax Loss Harvesting

Post by AlphaPilot » Mon Feb 11, 2019 1:33 pm

The Wizard wrote:
Mon Feb 11, 2019 11:37 am
AlphaPilot wrote:
Mon Feb 11, 2019 11:30 am
If you hold some VTSAX in a 401k but also in a regular taxable account, and want to sell/TLH/Trade in the brokerage but leave alone in the 401k due to the other choices in the 401k, does the bit sold in the regular taxable account count as TLH or since some was held elsewhere....it negates the benefit of TLH as a whole?
No, assuming you didn't buy more in 401k in that timeframe...
So what is the issue with people saying that Wealthfront TLH should be disabled if you hold the same funds in other accounts?

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