Harvesting tax losses this year?

[roger r]

In past years, selling a few loosing stocks/funds and writing off the maximum with maybe a little carry over loss into the next year was somewhat of a no brainer. This year a lot of us may have the option to harvest losses that would carry over for 5 or 10 years or some other obscenely unmentionable number. What are folks general plans for this? I'm thinking pretty seriously about doing some "portfolio reallocations" that could give me many years of carry over losses, but am wondering if there is some bit of logic I'm missing?

 

[LOL!]

I alway harvest losses in my taxable account before the end of the year. That way, I always start January without any red numbers in my portfolio manager.

There is essentially no downside to doing a proper tax-loss harvesting on losers and there is a tremendous amount of downside by not doing it.

 

[DblDoc]

My plan? Harvest as much as possible! Just be sure to avoid the wash sale rules. The only downsides I'm aware of are 1) You die and you don't get to use them, 2) The tax laws get changed in the future. Neither do you have much control over so hardly worth worrying about.

DD

 

[DougViages]

Harvesting Capital Losses

I know that I have Capital Gains coming out of a partnership, and I want to "wash" them to zero with losses. I am also concerned about what my mutual funds will finally give me at year end in the way of Caoital Gains and Losses. Anyone know how to get a handle on this now, rather then right at year end?

 

[audreyh1]

Hmmmm - maybe I will! I could probably seriously offset some capital gains I realized realized earlier this year.

Audrey

 

[donheff]

Already did some and made off setting equity purchases in IRAs. Now I am holding excess cash in taxable accounts and am ready to buy there and balance to cash in the IRA. How do you figure out when VG will declare dividends in it's various funds? I don't want to buy back in in a taxable fund just shy of a dividend declaration. Should I just wait until early January?

 

[kaneohe]

Already did some and made off setting equity purchases in IRAs. Now I am holding excess cash in taxable accounts and am ready to buy there and balance to cash in the IRA. How do you figure out when VG will declare dividends in it's various funds? I don't want to buy back in in a taxable fund just shy of a dividend declaration. Should I just wait until early January?

You could call VG and ask when....typ. the around the same times each yr but funds have been known to shift dates at times. About a month or so before the dates, they make have estimates. You might have to balance "not buying the distribution" vs being left behind if the market takes off . I would imagine in the index fund that DEC distributions would not be huge typically (esp. if paid quarterly). Actively managed ones could be more of a surprise.

 

[Nords]

Hmmmm - maybe I will! I could probably seriously offset some capital gains I realized realized earlier this year.

That's why we've started a tax-loss swap, it's "working" quite well for us, and we'll be swapping back into our original asset allocation around the week of 17 Nov.

How do you figure out when VG will declare dividends in it's various funds? I don't want to buy back in in a taxable fund just shy of a dividend declaration. Should I just wait until early January?

Bogleheads may have a better schedule, but the announcements start coming in late Nov. Or you could ask Vanguard, because this time of year they start getting that question frequently.

If you bought & sold over a period of 31 days, would Vanguard nick you a percentage fee for "frequent" trading?

 

[NW-Bound]

This year a lot of us may have the option to harvest losses that would carry over for 5 or 10 years or some other obscenely unmentionable number.

If you buy individual stocks or even sector MFs or ETFs, there will be opportunities in future years to use the carryover loss to "harvest gains".

Not having to worry about taxes makes it easier to sell when you think something has changed, and your stock is heading down from a top.

I was often reluctant to sell due to tax concerns, just to see that gain evaporates before my eyes. There, no more gain to worry about taxes!

 

[donheff]

You might have to balance "not buying the distribution" vs being left behind if the market takes off . .

I don't have to worry about that. I sold some managed funds in my taxable and bought VG indexes in the IRA on the same date -- it is "a wash" but avoids wash sale problems. Now I simply want to shift the cash back to the IRA to keep the interest out of my taxes.

If you bought & sold over a period of 31 days, would Vanguard nick you a percentage fee for "frequent" trading?

I should be OK but I do need to be careful about that.

 

[travelover]

Not to hijack this thread, but.........

This has gotten me to thinking about taking advantage of this downturn. I have (had) about $80K in the Vanguard Total Stock Market fund, which I bought in April. If I simply make an exchange to roughly proportionate shares of S&P 500 and midcap index funds, would this not accomplish the tax loss and protect my position within wash rules?

 

[kaneohe]

Not to hijack this thread, but.........

This has gotten me to thinking about taking advantage of this downturn. I have (had) about $80K in the Vanguard Total Stock Market fund, which I bought in April. If I simply make an exchange to roughly proportionate shares of S&P 500 and midcap index funds, would this not accomplish the tax loss and protect my position within wash rules?

I worry about the "equivalence" of 1 extensive index and it's component parts esp if the proportions of the parts are similar to the extensive index but I seem to be in the distinct minority.
Just for fun, you might ask VG about that proportion and then try to avoid being too close to it. If you were really worried about it, I would switch to e.g. just S&P 500 for 31 days or more and then switch back.

 

[NW-Bound]

The wash rule applies to identical and also "substantially identical" equities and options. That leaves a lot to interpretation.

With the market as crazy as it is, you do not want to miss out on a rally like yesterday, so I would buy something to replace what I just sold. But does it really matter that you have to make up the same constituents as the total market?

IMO, there is so much correlation between sectors because at the moment they all trade on greed and fear factors, and not the fundamentals. So it does not matter much what you buy/hold for 1 month, before you switch back to what you really want.

 

[calmloki]

Not to hijack this thread, but.........

This has gotten me to thinking about taking advantage of this downturn. I have (had) about $80K in the Vanguard Total Stock Market fund, which I bought in April. If I simply make an exchange to roughly proportionate shares of S&P 500 and midcap index funds, would this not accomplish the tax loss and protect my position within wash rules?

We had a bit of VTSMX purchased earlier this year - put in an order to sell last night to tax loss harvest - dunno when it will execute, but the confirm says "restricted till 12/28/2008". To prevent frequent trading of index stocks Vanguard won't let me any VTSMX until that date.

That's my understanding, make of it what you will. Don't think buying S&P 500 would be a problem, but i know about nothing on markets.

 

[haha]

I was often reluctant to sell due to tax concerns, just to see that gain evaporates before my eyes. There, no more gain to worry about taxes!

Yes, this happened to many of us. Still I think it is a generally good idea to think hard before you realize a gain, unless you think the company has gone bad, or the stock is extremely overpriced. I have cautiously taken gains before, only to pay the tax and then watch the stock continue merrily on upward.

Right now we are quite aware of losses and risks, but IMO that doesn't mean that we should over emphasize this aspect in our portfolio management.

Ha

 

[travelover]

We had a bit of VTSMX purchased earlier this year - put in an order to sell last night to tax loss harvest - dunno when it will execute, but the confirm says "restricted till 12/28/2008". To prevent frequent trading of index stocks Vanguard won't let me any VTSMX until that date.

That's my understanding, make of it what you will. Don't think buying S&P 500 would be a problem, but i know about nothing on markets.

Amazing. Please post an update if this changes.

 

[calmloki]

Amazing. Please post an update if this changes.

I left out a word: VG won't let me buy the same index stock i sold for 60 days - till 12/28 - same message on both the VTSMX and the VEIEX emerging markets order confirms. That's more restrictive than my understanding of a wash sale rule, which is no purchase 30 days before or after a tax harvest sale. (as i understand - again - no stock whiz here)

 

[Mike1968]

My understanding is that once you sell a Vanguard MF, you cannot buy the same fund you sold ONLINE for 60 days. That is Vanguards frequent trading rule. You can buy back into the fund you sold via mail after the 31 days, though. Hope that clears the Vanguard 60 day restriction up.

Rebuying the same fund online is 60 days or 31 days via mail.

 

[calmloki]

My understanding is that once you sell a Vanguard MF, you cannot buy the same fund you sold ONLINE for 60 days. That is Vanguards frequent trading rule. You can buy back into the fund you sold via mail after the 31 days, though. Hope that clears the Vanguard 60 day restriction up.

Rebuying the same fund online is 60 days or 31 days via mail.

Hey! Now that you mention it - remember reading what you said here in the past! Thanks!

 

[donheff]

My understanding is that once you sell a Vanguard MF, you cannot buy the same fund you sold ONLINE for 60 days. That is Vanguards frequent trading rule. You can buy back into the fund you sold via mail after the 31 days, though. Hope that clears the Vanguard 60 day restriction up.

Rebuying the same fund online is 60 days or 31 days via mail.

Yes, this is Vanguard's policy. If you are doing tax loss harvesting you don't sell and buy back into the same fund in any event -- that would be a wash sale. You should sell and buy an equivalent but differently structured fund. If possible use cash to buy the replacement on the same day to avoid a sudden 900 point jump.