Talk:Tax loss harvesting

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In this example, you get both interest-free loan and free money from the IRS. You deducted the $1,000 loss at the 25% rate. When you sold the shares, you had $1,000 more capital gains on the $9,000 investment compared to the case without tax loss harvesting. However, you paid 15% on the capital gains. So, 15% of $1,000, which is $150, is an interest-free loan, and 10% (= 25% - 15%) of $1,000, which is $100, is free money from the IRS.


In the above example I find the $150 - interest free loan and $100 free money from IRS confusing to understand. Is it possible to make it more clear? --LazyNihilist 23:46, 23 September 2011 (EDT)

Perhaps the page could use a section devoted to a potential caveat regarding tax loss harvesting (as well as the associated asset location issue) during the later stages of the life cycle. As loss carryforwards end with the death of the taxpayer (IRS pub 544).
from Fischer, Marcel, Are Bonds Desirable in Tax-Deferred Accounts? (February 7, 2008). Available at SSRN: http://ssrn.com/abstract=997818 or http://dx.doi.org/10.2139/ssrn.99781
"Another interesting aspect that arises from the different taxable treatment of capital gains and losses is the fact that a tax loss carry-forward that has not been used until the end of the investor's life is forfeited. This causes the value of the tax loss carry-forward to decrease substantially as the investor gets older."
--Blbarnitz 13:05, 27 November 2013 (CST)

The SSRN paper was authored at the Copenhagen Business School (Sweden). Are there additional (peer reviewed) papers which discuss this aspect? I didn't understand the paper, but would this proposed section conflict with tax location guidance elsewhere in the wiki (Principles of tax-efficient fund placement - asset allocation without regard to taxes first, then consider taxes)?

Perhaps this could be simplified as a "finer point" of operation? Readers would then be aware of the IRS restriction.

  • Death of taxpayer. Capital losses cannot be carried over after a taxpayer's death. They are deductible only on the final income tax return filed on the decedent's behalf. (IRS pub 544).

Note that I hacked the URL to point exactly at the start of the section. Increment (or decrement) the number at the tail end of the URL by a few counts and watch the starting position change within the page. In this case, the number changed from 100072648 to 100072659. Also, the DOI URL is missing the last digit: http://dx.doi.org/10.2139/ssrn.997818

--LadyGeek 16:28, 27 November 2013 (CST)

Wash sale redraft?

Livesoft suggestion:Re: Any book recs specifically for Tax Harvesting?, forum discussion
for passage:
"If you sell Total Stock Market with losses and buy back the same fund within 30 days before or after the sale, that would be called a wash sale, and you cannot claim the losses on your 2008 tax return. The definition of a wash sale is a bit more complicated than that. Before you do tax loss harvesting, be sure to familiarize yourself with the wash sale rule."
Could be instead:
"If you sell shares of Total Stock Market for a loss and buy new, different, or replacement shares of the same or substantially identical fund within 30 days before or after the sale in any accounts owned by you or your spouse including IRAs, that would create a so-called wash sale. The loss would then be disallowed temporarily (or permanently if the different shares are held in an IRA) and you cannot claim the loss on your tax return. The definition of a wash sale is a bit more complicated than that. Before you do tax loss harvesting, be sure to familiarize yourself with the wash sale rule. It is not a wash sale if you buy shares and within 30 days sell those shares for a loss since they are the same shares and are not new, different, nor replacement shares. You must still own other shares purchased in the 30 days before or after the sale for a wash sale to occur. Also it is not illegal to create a wash sale. There is no extra penalty for a wash sale beyond having the loss disallowed on your tax return usually temporarily."
--Blbarnitz 16:04, 23 December 2014 (CST)

Reader feedback: Strategies for taking the mo...

23.126.179.98 posted this comment on 1 March 2015 (view all feedback).

Strategies for taking the most advantage of this, how to accumulate lots of lots of losses, and the long term benefits of having lots of losses available to offset other income (including from Roth conversions, if that's how it works, I'm not sure and would like to learn more.

Any thoughts?

Blbarnitz 20:41, 2 March 2015 (CST)

Not substantially equivalent funds

Re your work in progress on Tax Loss Harvesting: In Step 4, I believe the reader would be better served by a table showing the not substantially equivalent funds. I have such a table in Word, but don't know how to format a table in Wiki. My table has headings of "Vanguard Fund Name", "Symbol", "Replacement Fund Name(s)", "Symbol(s). Admiral Shares

Vanguard Total Stock Market Index Adm VTSAX 12% Vanguard Small-Cap Index Fund Adm 88% Vanguard Large-Cap Index Fund Adm VSMAX VLCAX Vanguard Total Stock Market Index Adm VTSAX Vanguard 500 Index Fund Adm VFIAX Vanguard Total Int’l Stock Index Adm VTIAX Vanguard FTSE All-World ex-US Adm VFWAX Vanguard Total Bond Market Index Adm VBTLX Vanguard Intermediate-Term Bond Index Adm VBILX

Investor Shares

Vanguard Total Stock Market Index VTSMX 12% Vanguard Small-Cap Index Fund 88% Vanguard Large-Cap Index Fund NAESX VLACX Vanguard Total Stock Market Index VTSMX Vanguard 500 Index Fund VFINX Vanguard Total Int’l Stock Index VGTSX Vanguard FTSE All-World ex-US VFWIX Vanguard Total Bond Market Index VBMFX Vanguard Intermediate-Term Bond Index VBIIX

If you can show me the way to construct such in Wiki I will be glad to try. Tortuga

Re your work in progress on Tax Loss Harvesting: In Step 4, I believe the reader would be better served by a table showing the not substantially equivalent funds. I have such a table in Word, but don't know how to format a table in Wiki. My table has headings of


You can copy the table into a spreadsheet, then use the Excel2wiki converter shown in: Create tables from a spreadsheet. I tried formatting your above text above into columns (which would then be put into a spreadsheet), but it's still not right. Once you have everything in the right cells, it should be straight-forward to copy-n-paste the content into the wiki. Feel free to practice creating the table in the Sandbox - that's what it's for.

Admiral Shares

"Vanguard Fund Name", "Symbol", "Replacement Fund Name(s)", "Symbol(s).			
Vanguard Total Stock Market Index Adm	VTSAX	12% Vanguard Small-Cap Index Fund Adm
88% Vanguard Large-Cap Index Fund Adm	VSMAX
VLCAX
Vanguard Total Stock Market Index Adm	VTSAX	Vanguard 500 Index Fund Adm	VFIAX
Vanguard Total Int’l Stock Index Adm	VTIAX	Vanguard FTSE All-World ex-US Adm	VFWAX
Vanguard Total Bond Market Index Adm	VBTLX	Vanguard Intermediate-Term Bond Index Adm	VBILX
			

Investor Shares

"Vanguard Fund Name", "Symbol", "Replacement Fund Name(s)", "Symbol(s).	
Vanguard Total Stock Market Index	VTSMX	12% Vanguard Small-Cap Index Fund
88% Vanguard Large-Cap Index Fund	NAESX
VLACX
Vanguard Total Stock Market Index	VTSMX	Vanguard 500 Index Fund	VFINX
Vanguard Total Int’l Stock Index	VGTSX	Vanguard FTSE All-World ex-US	VFWIX
Vanguard Total Bond Market Index	VBMFX	Vanguard Intermediate-Term Bond Index	VBIIX

--LadyGeek 21:44, 6 December 2016 (EST)

I missed that development is in this User draft page: User:LadyGeek/Tax loss harvesting for beginners --LadyGeek 22:03, 7 December 2016 (EST)