TLH time!

[TheWizard]

With today's down market, I decided to do my first Tax Loss Harvesting maneuver of the year. I sold four lots of a large growth index ETF which were purchased in my taxable account in the first nine weeks of the year and all showing loss.

I had some unusual personal expenses in the last few months of '25 or I might have more purchases showing loss.

I quickly used the proceeds from that sale to buy shares of a different large growth index ETF, so I remain fully invested.

It can be a little tricky deciding when to pull the trigger on a TLH sell/buy. I booked ~$1000 tax loss on this transaction which I was ok with.
If markets continue to decline in coming weeks, I will repeat the process once new losses exceed $1k, ruffly.

This is another good reason to hold ETFs, not MFs, in your taxable account, at least for recent purchases...

 

[PaunchyPirate]

I've harvested 3 times so far this year. I specifically wanted to harvest at least $3000 that I intend to use to lower my MAGI for the year. I'm going to be dangerously close to the ACA cliff this year and I may need that $3000 to keep me under. I have reached my $3000 goal plus a little more. I will certainly harvest more if the opportunity arises. I also tend to look at more than $1000 in losses before I pull the trigger.

 

[marko]

Made me look. I got nuttin'. All still green.

 

[audreyh1]

I’m nowhere near to having any losses to harvest.

 

[TheWizard]

I've harvested 3 times so far this year. I specifically wanted to harvest at least $3000 that I intend to use to lower my MAGI for the year. I'm going to be dangerously close to the ACA cliff this year and I may need that $3000 to keep me under. I have reached my $3000 goal plus a little more. I will certainly harvest more if the opportunity arises. I also tend to look at more than $1000 in losses before I pull the trigger.

It's a tricky business.
It helps to have your TLH partners already known: MGK/VUG/VOOG/VONG for me in the large growth category.
A different set of partners in the large blend category.

And I prefer to wait two weeks+ before doing another TLH maneuver, but that's not always feasible.

What we're fighting here is that certain national policy changes can cause the stock market to recover rather quickly, thus evaporating your paper losses.
So it's partly a matter of listening to the voices in your head...

 

[Koolau]

I've structured my investments such that TLH would be minimal (just a few stocks outside of funds). I prefer it that way as it means I don't have any internal conflict about what to do with my few stocks.

TLH can be a great move but does require a bit of luck - kind of like picking stocks. Best luck!!

 

[COcheesehead]

It's a tricky business.
It helps to have your TLH partners already known: MGK/VUG/VOOG/VONG for me in the large growth category.
A different set of partners in the large blend category.

And I prefer to wait two weeks+ before doing another TLH maneuver, but that's not always feasible.

What we're fighting here is that certain national policy changes can cause the stock market to recover rather quickly, thus evaporating your paper losses.
So it's partly a matter of listening to the voices in your head...

There’s really little downside to tax loss harvesting IF you do it correctly and it sounds like you are. You are never really out of the market, but you bank that tax advantage for future use. Even if you never use it, there’s little harm in capturing it.
I carried losses from 2008/2009 all the way to 2016, saving capital gains along the way and getting the credit against earned income, but never missing out on market gains either. I now have a little piggy bank from 2022 that helps us as well. My wife has a very part time gig teaching intro photography at the local university. The $3000 credit against earned income wipes out half her compensation. It’s small, but it all adds up at tax time.

 

[MarieIG]

Hmmmm, good idea. I do have something floating around I can sell, and buy back later if I feel so inclined.

 

[pb4uski]

I have some, but only because I sold a bunch of individual preferreds and reinvested the proceeds into some preferred stock funds that have gone south about 4.5%. But even then it is only 3.5% of our taxable account and taxable account is only 24% of the total.

 

[SecondCor521]

I'm looking as well but I have a lot going on financially at the moment and need to be careful of wash sales.

This is another good reason to hold ETFs, not MFs, in your taxable account, at least for recent purchases...

I've booked losses by exchanging MFs at Vanguard. Zero time out of the market. Could you explain the above a little more about the benefits of EFTs vs MFs wrt tax loss harvesting? The one disadvantage to MFs is that one can't know the exact size of the loss because you have to put in the order during market hours and it executes at close. Although if you're in index MFs and wait until just before market close you can usually get a pretty good idea.

 

[TheWizard]

I'm looking as well but I have a lot going on financially at the moment and need to be careful of wash sales.



I've booked losses by exchanging MFs at Vanguard. Zero time out of the market. Could you explain the above a little more about the benefits of EFTs vs MFs wrt tax loss harvesting? The one disadvantage to MFs is that one can't know the exact size of the loss because you have to put in the order during market hours and it executes at close. Although if you're in index MFs and wait until just before market close you can usually get a pretty good idea.

Regarding the ETF advantage, you've basically got it. My market order sale of four lots of MGK yesterday happened at 11:46 am and the (unsettled) proceeds were in my settlement fund immediately.
Then my market order buy of VUG happened at 11:48 am, leaving just $100 in my settlement fund for now.

With mutual funds, the sale doesn't happen until 4 pm Eastern and you can't buy using the proceeds until the next open day at 4 pm.

Wash sales can be an issue, yes, especially for people like me who hold many of the same ETFs in all three accounts (taxable, tIRA, RIRA).

Step one is to have all dividends go to your settlement funds and then be "careful" which funds you manually buy with that money.

Step two is not to buy new shares of multiple funds in your taxable account at the same time.
Buy only VOO shares this month and then only VGT shares next month. And then avoid buying those same ETFs within 30 days in your IRAs.

The majority of the time, we're not looking at TLH opportunities anytime soon, but it's good to have certain practices in place regardless...

 

[SecondCor521]

Regarding the ETF advantage, you've basically got it. My market order sale of four lots of MGK yesterday happened at 11:46 am and the (unsettled) proceeds were in my settlement fund immediately.
Then my market order buy of VUG happened at 11:48 am, leaving just $100 in my settlement fund for now.

Understood, thanks.

With mutual funds, the sale doesn't happen until 4 pm Eastern and you can't buy using the proceeds until the next open day at 4 pm.

Maybe it's a Vanguard thing, but I can exchange (immediate sell then buy) and remain fully invested. No one day delay.

Wash sales can be an issue, yes, especially for people like me who hold many of the same ETFs in all three accounts (taxable, tIRA, RIRA).

Yup, me too. I've made some Roth IRA contributions and so I have purchases executing on Monday, so I'm going to wait 30 days and see what's up. Historically I've tended to TLH too early in down cycles, so maybe I'll benefit from the delay.

 

[COcheesehead]

Maybe it's a Vanguard thing, but I can exchange (immediate sell then buy) and remain fully invested. No one day delay.

In a taxable, you need settled cash or margin enabled. In an IRA there is a thing called limited margin. All of these will let you sell and buy simultaneously.

 

[SecondCor521]

In a taxable, you need settled cash or margin enabled. In an IRA there is a thing called limited margin. All of these will let you sell and buy simultaneously.

I don't have margin enabled and I've done it without settled cash.

I think it has something to do with me exchanging from and to Vanguard funds.

 

[Golden Mean]

I’m nowhere near to having any losses to harvest.

+1

I've never TLH and probably never will? Retired in 2022 so no new purchases since then and it's been a bull market for like 25 years. I think my worst performing MF is up like 35%.

I guess I could have been trying it while employed but I pretty much just did the set and forget (VTSAX) for my whole career.

 

[audreyh1]

Regarding the ETF advantage, you've basically got it. My market order sale of four lots of MGK yesterday happened at 11:46 am and the (unsettled) proceeds were in my settlement fund immediately.
Then my market order buy of VUG happened at 11:48 am, leaving just $100 in my settlement fund for now.

With mutual funds, the sale doesn't happen until 4 pm Eastern and you can't buy using the proceeds until the next open day at 4 pm.

Wash sales can be an issue, yes, especially for people like me who hold many of the same ETFs in all three accounts (taxable, tIRA, RIRA).

Step one is to have all dividends go to your settlement funds and then be "careful" which funds you manually buy with that money.

Step two is not to buy new shares of multiple funds in your taxable account at the same time.
Buy only VOO shares this month and then only VGT shares next month. And then avoid buying those same ETFs within 30 days in your IRAs.

The majority of the time, we're not looking at TLH opportunities anytime soon, but it's good to have certain practices in place regardless...

You can sell and buy simultaneously with mutual funds at close of market if you do an exchange. Usually possible within the same fund family. Works at Fidelity.

 

[audreyh1]

In a taxable, you need settled cash or margin enabled. In an IRA there is a thing called limited margin. All of these will let you sell and buy simultaneously.

No, don’t need margin in taxable, you just do an exchange between funds in the same family. Fidelity allows this for all Fidelity funds.

 

[COcheesehead]

I don't have margin enabled and I've done it without settled cash.

I think it has something to do with me exchanging from and to Vanguard funds.

Oh exchanges are same day. Buys and sells are per my post.

 

[audreyh1]

Oh exchanges are same day. Buys and sells are per my post.

But that’s the point, you don’t have to sell and wait for the next day to buy, you can exchange instead,

 

[CalBird]

Most of my holdings in taxable have substantial gains(100+%). Whenever I withdraw from taxable, the capital gains contributes majority of my income. It largely limits my spending as long as I want to manage my income level.

 

[COcheesehead]

But that’s the point, you don’t have to sell and wait for the next day to buy, you can exchange instead,

I am agreeing with you. Sorry if it doesn’t appear that way.

 

[GrayHare]

A lower price point can also a good time to convert some tIRA money to Roth. Past initial wartime declines in equity prices have usually been in the 5% to 10% range, which is the drop we've now seen relative to earlier this year. If you expect to time the exact lowest day, you'll need to power up your crystal ball.

 

[jebmke]

I am agreeing with you. Sorry if it doesn’t appear that way.

yeah; I was doing exchanges all the way down in the 20008-09 down-tick. My last US trade was an exchange back to Total Stock Market on 3/16/09.

 

[NomDeER]

I've never done tax loss harvesting before. I invested in a total stock market index fund in my taxable account earlier this year, and it is is now in the red, so maybe this is a good time to explore the possibility.

A lower price point can also a good time to convert some tIRA money to Roth.

I did that last week, but that may have been a mistake? I was converting shares in a total stock market fund. Does that mean I have to wait for thirty days until after I did that to sell for a loss in my taxable account?

Can anyone point me to some reliable information about how to go about tax loss harvesting and what I must do - or not do - in order to accomplish that?

 

[PaunchyPirate]

I've never done tax loss harvesting before. I invested in a total stock market index fund in my taxable account earlier this year, and it is is now in the red, so maybe this is a good time to explore the possibility.



I did that last week, but that may have been a mistake? I was converting shares in a total stock market fund. Does that mean I have to wait for thirty days until after I did that to sell for a loss in my taxable account?

Can anyone point me to some reliable information about how to go about tax loss harvesting and what I must do - or not do - in order to accomplish that?

This would be a good starting point.

https://www.bogleheads.org/wiki/Tax_loss_harvesting