Tax Loss Harvesting

[Closet_Gamer]

I just spent time combing through the wreckage.

One thing that popped out at me was the opportunity do some tax loss harvesting. I normally think of this as a year-end activity.

Looking back, I have some ETFs/Funds where everything I've purchased in the last 3 years is underwater right at this moment.

Beyond just rebalancing, this is a great time to lock in losses against future gains.

Don't forget wash sale rules and ensuring the funds you swap in are sufficiently different!

 

[jebmke]

The best time for most people to book losses is when they have them. The end of the year is nothing magical. I monitor my accounts monthly. I have a pretty good idea which ones might be close to the point of having unrealized losses so if there is a sharp move down, I check that fund more frequently. I was most aggressive harvesting losses during the 2008-2009 downturn. My last loss harvest (domestic) was March 16, 2009. It took me most of the next decade to work off the losses when I was re-balancing out of equity as the market moved up past my re-balance point. It is helpful to have identified your TLH pairs (or triplets) in advance. The destination should almost always be something you'd be willing to hold forever.

 

[UnrealizedPotential]

In regards to the wash sale rule: I am not an expert, but I think if you sell at a loss then you need to wait 31 days and then you can buy back in the same investment or one like it . If you buy an investment that is different from the one sold, then you do not need to wait the 31 days if sold at a loss.

 

[savory]

Here is a tax loss harvesting whitepaper from robo-adviser Wealthfront. I found it helpful

https://research.wealthfront.com/whitepapers/tax-loss-harvesting/

 

[kaneohe]

In regards to the wash sale rule: I am not an expert, but I think if you sell at a loss then you need to wait 31 days and then you can buy back in the same investment or one like it . .....................

and don't forget the opposite side..........after the sale, you must not own any shares purchased within 30 days before the sale..........so there is that +/- 30
day symmetry.........if there will be any, then sell them too.

 

[mrfeh]

Beyond just rebalancing, this is a great time to lock in losses against future gains.

I did this yesterday. Will have some capital losses to use at tax time for the next several years.

 

[UnrealizedPotential]

and don't forget the opposite side..........after the sale, you must not own any shares purchased within 30 days before the sale..........so there is that +/- 30
day symmetry.........if there will be any, then sell them too.

Thank you for that. Do you know if the clock starts ticking on that 30 days the day you sell or the settlement date? There are usually 2 or 3 days in between the two.

 

[COcheesehead]

I built up a 17,000 tax loss last week which will save me about $5500 in taxes, freed up some cash and reinvested in something else. Don’t forget to look at individual lots, not just whole positions. Anything you bought in the last 12 months may show a loss. You might as well have Uncle Sam help ease the pain.

 

[kaneohe]

Thank you for that. Do you know if the clock starts ticking on that 30 days the day you sell or the settlement date? There are usually 2 or 3 days in between the two.

not sure........but everything I read makes it sound like the trade date........
just don't cut it too close if you can avoid it