Join Early Retirement Today
Closed Thread
 
Thread Tools Search this Thread Display Modes
2018 Capital Gain Dist will affect my ACA costs
Old 10-18-2018, 09:59 PM   #1
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 280
2018 Capital Gain Dist will affect my ACA costs

It's looking like the 2018 capital Gain distribution of the shares I own in Wellesley Admiral fund will throw me over the Income limit to qualify for ACA. Currently, vangaurd is showing a realized capital gain of $2.71/share. I like the Wellesley fund, and want to continue investing in it in the future, but come December, I need to take action as to not have my ACA subsidy affected.

Currently, I have a loss of $20k at today's share price and have owned the stock for more than a year now.

I see 2 options:
1. Sell the shares December 1, (before the distribution), wait 30 days to fulfill wash rule requirements, and buy the stock back at the reduced price January 1.

2. Wait to sell after the Dividends and Capital gains distribution are made (approx December 15), Sell all shares before year end, and buy back 30 days later, using the loss to offset the Capital gains distribution.

I am asking the financially savvy group here, which is the best path to take? What other things should I be considering?

Thank you in advance for helpful advice.
__________________

DAYDREAMER is offline  
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-18-2018, 10:10 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 19,583
Are you sure?... This webpage says that the realized capital gains are $1.12/share.

https://investor.vanguard.com/mutual...ibutions/vwinx

Sell now and lock in that $20k loss... reinvest proceeds in another Vanguard 40/60 balanced fund... perhaps VGWIX that has similar AA and realized gains of only $0.15/share... then after wash sale period is over sell VGWIX and buy back VWINX if you want.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is online now  
Old 10-18-2018, 10:12 PM   #3
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 169
Or, you could just pay your fair market price for health insurance and not have the rest of us subsidize your medical care.

Marc
__________________
"Carpe diem quam minimum credula postero"

Horace
Marc is online now  
Old 10-18-2018, 10:14 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 19,583
Marc, you have a problem with people playing by the rules? Blame the rulemakers, not the players.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is online now  
Old 10-18-2018, 10:14 PM   #5
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 280
Quote:
Originally Posted by pb4uski View Post
Are you sure?... This webpage says that the realized capital gains are $1.12/share.

https://investor.vanguard.com/mutual...ibutions/vwinx

Sell now and lock in that $20k loss... reinvest proceeds in another Vanguard 40/60 balanced fund... perhaps VGWIX that has similar AA and realized gains of only $0.15/share... then after wash sale period is over sell VGWIX and buy back VWINX if you want.
I own Wellesley Admiral fund, and looking at the fund page right now that says as of 9/30/2018, realized capital gains is $2.71
DAYDREAMER is offline  
Old 10-18-2018, 10:16 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 19,583
Ah... you are right, I was looking at the Investor shares page.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is online now  
Old 10-18-2018, 10:32 PM   #7
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,911
In addition to realizing capital losses, there are other ways to reduce AGI. See basically the bottom-most section on the front page of the 2017 version of Form 1040. I don't know if any apply to you, but they are options that may be worth considering.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline  
Old 10-18-2018, 10:37 PM   #8
Full time employment: Posting here.
beowulf's Avatar
 
Join Date: Oct 2007
Posts: 574
Tiny little violin playing for all those whose assets are so large and throwing off so much income that their ACA subsidies might be endangered.
__________________
Mission accomplished - not necessarily ER, but certainly R.
beowulf is offline  
Old 10-18-2018, 10:38 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 19,901
Unrealized gains change from day to day.

Distributions can be short and long term. That may not matter to you.

Be sure to wait 31 days after the sale date to buy back in order to avoid the wash sale rule.

Quote:
So the wash-sale period is actually 61 days, consisting of the 30 days before to 30 days after the date of sale.

Read more: Wash-Sale Rule https://www.investopedia.com/terms/w...#ixzz5ULQqSX8j
Follow us: Investopedia on Facebook
__________________
Retired since summer 1999.
audreyh1 is online now  
Old 10-18-2018, 11:23 PM   #10
Recycles dryer sheets
 
Join Date: May 2014
Posts: 357
Quote:
Originally Posted by beowulf View Post
Tiny little violin playing for all those whose assets are so large and throwing off so much income that their ACA subsidies might be endangered.
+1
TwoByFour is offline  
Old 10-18-2018, 11:23 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 14,764
Or you can calculate the income on the distribution and sell only the number of shares you need to offset that income...


Why take the whole $20K loss if you do not need it...


Now, if you want to reduce your income to get more subsidy then go for it...




Last... check back in a month and a half... I am sure that Vanguard will try and reduce that number after the latest market drop and it might not be as bad as you think when distributions come rolling along...
Texas Proud is offline  
Old 10-19-2018, 12:09 AM   #12
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 280
Quote:
Originally Posted by Texas Proud View Post
Or you can calculate the income on the distribution and sell only the number of shares you need to offset that income...


Why take the whole $20K loss if you do not need it...


Now, if you want to reduce your income to get more subsidy then go for it...




Last... check back in a month and a half... I am sure that Vanguard will try and reduce that number after the latest market drop and it might not be as bad as you think when distributions come rolling along...
I guess should have added a 3Rd option as you describe. One concern I have is, if I wait until after the capital gains are distributed, will I have enough time to actually get the sale transaction complete. Let's say they do the distributions December 21, markets are closed through Christmas. I don't know how long it takes for an actual sale transaction to complete. If the transaction completes after December 31, 2018, ACA subsidy is lost.

Sorry to all the replies that find my learning to optimize ACA subsidies offensive. It's this diligent study of rules and financial interest that has allowed me to ER at 52.
DAYDREAMER is offline  
Old 10-19-2018, 12:59 AM   #13
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,911
Quote:
Originally Posted by DAYDREAMER View Post
One concern I have is, if I wait until after the capital gains are distributed, will I have enough time to actually get the sale transaction complete. Let's say they do the distributions December 21, markets are closed through Christmas. I don't know how long it takes for an actual sale transaction to complete. If the transaction completes after December 31, 2018, ACA subsidy is lost.
I wouldn't worry about this too much, but you can call Vanguard and talk about it with them.

First, Wellesley distributed last year on 12/15, not 12/21.

Second, the market is only closed on Christmas Day itself. The market will be open weekdays every day in December except 12/25.

Third, if you place the order in the morning (even up until shortly before the market closes, but I'm not sure the exact cutoff - I think it's 4pm Eastern, but again I'm not sure), then the transaction will occur the same day.

However, I am not sure if the two or three day settlement period after the transaction date matters in terms of which tax year the transaction belongs to. I personally have similar kinds of transactions to make, and I'll probably be making them around 12/24, which I think is plenty of time for the transaction to count for 2018.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline  
Old 10-19-2018, 05:15 AM   #14
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 2,320
I wonder if there would be so much negativity against ACA subsidies if there was not the 400% FPL cliff and the subsidies smoothly rolled off to $0 as income increased?

The "affordable" part of ACA was the intent that nobody would be forced to pay more than ~ %10 of their income on health insurance premiums.

I believe the reason that we have the 400% cliff is that full funding could not be secured.
gauss is online now  
Old 10-19-2018, 05:39 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 6,552
Wellesley seems like a bad fund to hold in taxable if you're edging towards the subsidy cliff, as are most managed funds. I would sell before the distribution and buy index funds. Whether you time the buy for after distributions is up to you.

I bit the bullet and sold Primecap last year at a profit and gave up the subsidy for a year to better position myself for future years. That's a risk because there's no guarantee the subsidy will continue. Tax/subsidy-wise you're in a better position because you can sell at a loss and qualify this year as well. I would sell whether or not it looks at year's end that you'll make it, so you don't go through this next year.
RunningBum is online now  
Old 10-19-2018, 05:56 AM   #16
Recycles dryer sheets
 
Join Date: Feb 2015
Posts: 207
OP: As mentioned Wellesley is probably not a good fit in a taxable account if you are trying to manage an ACA subsidy due to the tilt toward bonds in the Fund. Perhaps you could exchange for a separate stock fund and a muni fund and Tax Loss Harvest each year to keep your income low enough to keep the subsidy. Plus, even though muni income counts toward your AGI when trying for a subsidy , at least this income will still be free from Federal Income Tax.


Also, for those with snide remarks concerning those of us with high level assets attempting to secure an ACA subsidy....why even post since your snide remarks add nothing to the discussion and does not help the OP out in any way. You would be better off posting over in the personal finance section of the city data forums. That is where all the crybabies constantly whine about millionaires "gaming" the system. Perhaps the mods could intervene?
MrLoco is offline  
Old 10-19-2018, 06:04 AM   #17
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 2,084
Quote:
Originally Posted by pb4uski View Post
Marc, you have a problem with people playing by the rules? Blame the rulemakers, not the players.
+1
I would like to see one negative comment about ACA income management from folks using the technique.
I am renting - not asking anyone to give up their mortgage deduction.
__________________
TGIM
Dtail is online now  
Old 10-19-2018, 06:18 AM   #18
Full time employment: Posting here.
flintnational's Avatar
 
Join Date: Mar 2008
Location: Atlanta Suburb
Posts: 952
I always love the threads where we criticize the legal tax strategies of other members. What fun! I guess we expect "others" to pay more taxes than they legally owe. Sounds about right.
__________________
"Oh, twice as much ain't twice as good
And can't sustain like one half could
It's wanting more that's gonna send me to my knees" - John Mayer
flintnational is offline  
Old 10-19-2018, 06:40 AM   #19
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 2,071
Do you have any shares that have losses? If so, you could sell shares at a loss. If you own the ETF version you should be able to sell identified shares. If you own the MF shares, then you may be stuck with average share cost based if that is what you picked the first time shares were sold.

Remember if you sell shares this year to miss the distribution, you still need to deal with taxes on the sale of shares.
bingybear is offline  
Old 10-19-2018, 07:24 AM   #20
Recycles dryer sheets
 
Join Date: Nov 2017
Posts: 75
ACA benefited many but was an unfair disaster for some people like us. After ACA, our premium doubled so we had to move into bronze plan to make it work. Needless to say we do not qualify for any subsidy. This year we have to pay more 60K into obamacare because of unusual gain.
__________________

Cpadave is offline  
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Question re: return of capital vs capital gain in a partnership Lisa99 FIRE and Money 4 02-10-2016 12:06 AM
Second home sale capital gain and ACA fisherman Other topics 17 11-06-2015 09:42 AM
When in dist. mode- reinvest div & int & sell shares or take div & int in cash? cashflo2u2 FIRE and Money 12 12-11-2008 04:25 PM
Mutual Fund/ETF dist. in Taxable Account maddythebeagle Young Dreamers 1 07-05-2005 11:11 AM

» Quick Links

 
All times are GMT -6. The time now is 07:04 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.