Tax Loss Harvesting

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Tax Loss Harvesting

Post by whzup444 » Thu May 21, 2020 8:00 pm

I'm in the 37% tax bracket (+ 10% state tax) and new to Tax Loss Harvesting. Trying to manage my own finances via Vanguard. I have the following funds in my taxable accounts with the following short-term capital losses. These investments were all purchased in January when the market was higher. Losses are calculated on average cost basis (default at Vanguard) - based across a few different transactions, but all bought higher than correct market prices.

VTCLX: -$2200
VTIAX: -$2100
VTMSX: $-2500

Total: -$6800 short term capital losses.

I guess my plan would be to sell all those assets, reinvest in comparable investments for at least 30 days (to get around the wash-sale rule), and then consider exchanging back to my prior investment portfolio after 30 days.

Few questions:
(1) Does this plan sound, right? I am understanding TLH correctly?
(2) I don't expect to have a ton of realized short or long term capital gains this year in my taxable account. It's my understanding that you can only deduct $3,000 from regular income using capital losses from tax-loss harvesting. And, if not credited against capital gains and/or regular income, the remaining capital loss gets carried over to the next tax year. Is this correct?
(3) Is it worth it to tax loss harvest >$3,000 expected credited against your non-investment income and do the carry over? Or should I just be targeting TLH to meet the $3,000 threshold?
(4) For the future, is it beneficial to change the cost basis at Vanguard to be calculated as "specific identification". I've read this on a few websites.

Thanks in advance! Newbie to this.

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Re: Tax Loss Harvesting

Post by retired@50 » Thu May 21, 2020 8:07 pm

Would you be selling the ENTIRE position in the listed funds, or just part of it?

I think the average cost basis will complicate the process.

I'd switch to specific identification if you intend to TLH.

This is one person's opinion. Nothing more.

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Re: Tax Loss Harvesting

Post by Vanguard Fan 1367 » Thu May 21, 2020 8:08 pm

If you purchased all those in January you may be able to change to specific ID if you don’t sell anything using the average cost. You can change your option to specific ID on the website. It will take maybe more than a day for them to do that for you.

You have more options with specific ID.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."

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Re: Tax Loss Harvesting

Post by Senorwc1 » Thu May 21, 2020 8:13 pm

1) yes
2) correct
3) I think anything over $1k is worth it
4) yes

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Re: Tax Loss Harvesting

Post by rkhusky » Fri May 22, 2020 8:28 am

Have you made any purchases of these three in the last 30 days, including dividend reinvestment?

Make sure there will be no dividend reinvestment within the next 30 days, if you will have any shares left after TLH.

There are dividends expected in less than a month, so you might want to send your dividends to the settlement account instead of reinvesting (you have several weeks to make this change). ... tributions

If you are selling all shares in a fund, then you don't need to worry about specific ID or dividend reinvestment or purchases within the last 30 days for that fund.

If the market jumps up after you TLH, be prepared to keep your replacement funds until you can TLH them.

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