Taxable to 529 with TLH, double tax savings?

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dachshunddad
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Joined: Mon Sep 03, 2018 8:22 pm

Taxable to 529 with TLH, double tax savings?

Post by dachshunddad »

I want to front load my child’s 529 for long term growth. However, I am hesitant to put a lump sum in for the year with high market valuation. Of course, I don’t want to sit on cash so I was thinking of buying in my taxable account. If the market drops, I can tax loss harvest and transfer to the 529. This would give me the upside if the market climbs but the ability to TLH before putting it in the 529 to grow. Thoughts? Overthinking this and I should just put it in 529?

Thanks in advance for your thoughts.
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RickBoglehead
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Re: Taxable to 529 with TLH, double tax savings?

Post by RickBoglehead »

Overthinking it.
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sycamore
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Re: Taxable to 529 with TLH, double tax savings?

Post by sycamore »

dachshunddad wrote: Thu May 06, 2021 10:03 pm I want to front load my child’s 529 for long term growth. However, I am hesitant to put a lump sum in for the year with high market valuation. Of course, I don’t want to sit on cash so I was thinking of buying in my taxable account. If the market drops, I can tax loss harvest and transfer to the 529. This would give me the upside if the market climbs but the ability to TLH before putting it in the 529 to grow. Thoughts? Overthinking this and I should just put it in 529?

Thanks in advance for your thoughts.
What if you put it in taxable and it continues to grow for awhile? By then you can't put it in the 529 anymore without selling and incurring a capital gain. In the meantime you'd lose any tax benefit from contributing (if your state has that benefit).

Another option to deal with hesitancy over high market valuations: lump sum 50% into the 529 now, and dollar cost average the rest over a year or two.
livesoft
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Re: Taxable to 529 with TLH, double tax savings?

Post by livesoft »

Do both.
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Topic Author
dachshunddad
Posts: 229
Joined: Mon Sep 03, 2018 8:22 pm

Re: Taxable to 529 with TLH, double tax savings?

Post by dachshunddad »

sycamore wrote: Fri May 07, 2021 6:42 am
dachshunddad wrote: Thu May 06, 2021 10:03 pm I want to front load my child’s 529 for long term growth. However, I am hesitant to put a lump sum in for the year with high market valuation. Of course, I don’t want to sit on cash so I was thinking of buying in my taxable account. If the market drops, I can tax loss harvest and transfer to the 529. This would give me the upside if the market climbs but the ability to TLH before putting it in the 529 to grow. Thoughts? Overthinking this and I should just put it in 529?

Thanks in advance for your thoughts.
What if you put it in taxable and it continues to grow for awhile? By then you can't put it in the 529 anymore without selling and incurring a capital gain. In the meantime you'd lose any tax benefit from contributing (if your state has that benefit).

Another option to deal with hesitancy over high market valuations: lump sum 50% into the 529 now, and dollar cost average the rest over a year or two.
I thought about that...if it never goes below the cost basis then it wouldn’t make sense to sell. Although, that doesn’t seem like too big of a problem since it would be at a long term capital gains rate when I use it. Splitting it up is a good thought also.
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