When lump sum in hot market think of TLH as a little downside protection?

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mrjohnanderson007
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When lump sum in hot market think of TLH as a little downside protection?

Post by mrjohnanderson007 »

HSA
VFIAX (Vanguard 500)
VMIAX (Vanguard Mid-Cap)

457B
VIIIX (Vanguard Institutional Index)
VMPCX (Vanguard Institutional Mid-Cap)

Brokerage
VTSAX (Vanguard Total Stock Market)

Roth
VTSAX (Vanguard Total Stock Market)

SEPIRA
VTSAX (Vanguard Total Stock Market)

I have 2 questions. First, if I buy VTSAX (Total U.S) in my brokerage, can I TLH (tax loss harvest) if I hold VTSAX in my other accounts? I was thinking to go back and forth between VTSAX and VFIAX (S&P500). If the answer is NO, I would feel comfortable buying VGT (Vanguard Technology) then TLH into VTSAX. Other ideas or options?

Second. I see many posts here regarding people worrying about lump sum investing a windfall. I have a windfall of $60k and like them, am afraid to lump sum in this crazy market even though I know statistically lump sum is superior over DCA (dollar cost averaging). If I was to buy in at the very top of the market today with 60k. Markets tank 50%. Sell for 30k. Buy back. I would have 30k of TLH for the next 10 years (3k is the max per year). Does my logic make sense in helping me, and others pull the trigger to lump sum?
lakpr
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Re: When lump sum in hot market think of TLH as little downside protection?

Post by lakpr »

Opinions very, but I view the wash sales rules to apply only between IRA accounts (either Traditional or Roth), and taxable accounts. I do not view retirement plan accounts within the purview of wash sales rules. But then again, I realize that this is being aggressive tax wise, I could be wrong and IRS may finally rule otherwise. I am also neither a tax lawyer nor a tax expert.

So, just ensure that there is zero overlap of funds between IRA and taxable. If you intend to buy VTSAX in taxable, and potentially tax loss harvest it, move your Roth IRA to a different brokerage firm than Vanguard -- say Fidelity or Schwab -- and buy their version of total stock market fund (FSKAX or SWTSX respectively). Or vice versa, open your taxable account at a provider other than Vanguard. The key principle is: zero overlap of funds between taxable and IRA at any time.

That still leaves the possibility that within 30 days of you investing in the stock market, it tanks, and you may held the same fund in IRA just before you sold it and then invested in taxable. Nothing you can do here, just pray that for 30 days it would not decline substantially.
livesoft
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by livesoft »

mrjohnanderson007 wrote: Fri Jul 30, 2021 4:01 pmI have 2 questions. First, if I buy VTSAX (Total U.S) in my brokerage, can I TLH (tax loss harvest) if I hold VTSAX in my other accounts?
Of course, you can. I do. Wash sales are easily avoided and not illegal.
Second. I see many posts here regarding people worrying about lump sum investing a windfall. ... Does my logic make sense in helping me, and others pull the trigger to lump sum?
It helps me to know that I can get a tax break from losses, so I like your logic.
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retiredjg
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by retiredjg »

If you use the 500 index as a tax-loss harvest partner for total stock index, you could create wash sales in the other accounts. This is not illegal, but it is something you must watch for and account for on your taxes. Or watch for and avoid.

I suggest you use total stock and large cap index as tax loss harvest partners in taxable. And use 500 index in all the other accounts. If you want, "complete" your 500 index with an extended market index in one of the other accounts.

Nobody knows if the HSA or 457 can even be involved in a wash sale. The IRS has not spoken. However, it is clear the Roth IRA and SEP IRA would be because they have spoken on that IRAs - even your spouse's IRA.
bogledogle
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by bogledogle »

It is not really downside protection. It's more of a "make lemonade from lemons" scenario. It will still hurt to see your balance shrink and wait until the market is back to where it was. So, lumpsum what you are comfortable with.

similarstocks.com will show you a list of TLH partner funds if you need them.
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cchrissyy
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by cchrissyy »

if thinking about harvesting losses helps you mentally worry less, cool

yes you can TLH while you own the same thing in your other accounts. you might be thinking of the disallowed losses for shares you bought within 30 days of the loss sale, but that is about purchase transactions not simply the fact you held on to what you already had. Like other people said, there is nothing wrong with having a wash sale. but if you really want to avoid one you could guarantee it by buying a different fund, like you already said, or by turning off automatic reinvested dividends in those account so you don't unknowingly buy something pls or minus 0 days of when you sell at a loss in your taxable account.

one other thing i want to point out for why not to worry is, say you buy 600 shares at 100 each, and later sell them at a loss. but oops, during that 30 day window your other account paid dividends and automatically bought a share. ok now you have 599 shares with losses you are allowed to deduct and 1 share with a disallowed loss. the only harm this wash sale caused you is some small tax rate you might have saved on the dollar value of the loss on one share.
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dbr
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by dbr »

I think if you need to rationalize that TLH will somehow make an otherwise intolerable loss somehow possible to bear then your whole plan is off base and needs to be rethought. Most likely you are planning an asset allocation that is wrong for you or you really have not thought through the implications of volatility and unpredictability in investing. It could also be a person should reassess what is causing nerves about being invested.

It is, of course, still true that TLH does reduce the net loss by a little. It is also true that there is nothing wrong with staging a change in asset allocation over time if that makes a person less nervous, though it would be better to understand why one is nervous.
reln
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by reln »

mrjohnanderson007 wrote: Fri Jul 30, 2021 4:01 pm HSA
VFIAX (Vanguard 500)
VMIAX (Vanguard Mid-Cap)

457B
VIIIX (Vanguard Institutional Index)
VMPCX (Vanguard Institutional Mid-Cap)

Brokerage
VTSAX (Vanguard Total Stock Market)

Roth
VTSAX (Vanguard Total Stock Market)

SEPIRA
VTSAX (Vanguard Total Stock Market)

I have 2 questions. First, if I buy VTSAX (Total U.S) in my brokerage, can I TLH (tax loss harvest) if I hold VTSAX in my other accounts? I was thinking to go back and forth between VTSAX and VFIAX (S&P500). If the answer is NO, I would feel comfortable buying VGT (Vanguard Technology) then TLH into VTSAX. Other ideas or options?

Second. I see many posts here regarding people worrying about lump sum investing a windfall. I have a windfall of $60k and like them, am afraid to lump sum in this crazy market even though I know statistically lump sum is superior over DCA (dollar cost averaging). If I was to buy in at the very top of the market today with 60k. Markets tank 50%. Sell for 30k. Buy back. I would have 30k of TLH for the next 10 years (3k is the max per year). Does my logic make sense in helping me, and others pull the trigger to lump sum?
If TLH makes sense for you (this is a complicated question to answer), you should consider using funds in your and your spouse's various accounts that track different indexes to avoid wash sales.
Topic Author
mrjohnanderson007
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by mrjohnanderson007 »

dbr wrote: Sat Jul 31, 2021 7:23 am I think if you need to rationalize that TLH will somehow make an otherwise intolerable loss somehow possible to bear then your whole plan is off base and needs to be rethought. Most likely you are planning an asset allocation that is wrong for you or you really have not thought through the implications of volatility and unpredictability in investing. It could also be a person should reassess what is causing nerves about being invested.

It is, of course, still true that TLH does reduce the net loss by a little. It is also true that there is nothing wrong with staging a change in asset allocation over time if that makes a person less nervous, though it would be better to understand why one is nervous.
As a thrifty person and boglehead I prefer to buy things on sale, or at reasonable market levels. I think most people would agree the markets are a little crazy right now.

When the markets tanked from covid I was buying in huge amounts. It was heaven... I also live the life I love on around $7,500 a year. Volatility is not a concern.
Topic Author
mrjohnanderson007
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by mrjohnanderson007 »

Thank you everyone. This has given me options but one thing is for certain. I need to brush up and do some reading on TLH. It's been a few years sense looking into this subject and it's a bit of a haze... If one wanted to be completely worry free and are not concerned about their "perfect allocation" haha, could do Large Cap and Mega Cap or something like that.
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retired@50
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by retired@50 »

mrjohnanderson007 wrote: Sat Jul 31, 2021 8:37 am I prefer to buy things on sale, or at reasonable market levels.
In twenty years, the current market level will probably look a lot more reasonable. :wink:

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Eagle33
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by Eagle33 »

If you are years away from needing the windfall money, then lump sum it now and forget it until you need it. If you wait, its not likely you are going to sell everything you already have in the market today and wait to invest it when you invest the windfall.
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Wiggums
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by Wiggums »

retired@50 wrote: Sat Jul 31, 2021 10:06 am
mrjohnanderson007 wrote: Sat Jul 31, 2021 8:37 am I prefer to buy things on sale, or at reasonable market levels.
In twenty years, the current market level will probably look a lot more reasonable. :wink:

Regards,
+1000
"I started with nothing and I still have most of it left."
Topic Author
mrjohnanderson007
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by mrjohnanderson007 »

These are the funds that preform almost identical to VTSAX (Vanguard Total U.S) and have similar tax efficient dividend returns (little more research needed to double check figures). I think using two of these as TLH partners would be easiest route.


VLCAX (Vanguard Large Cap)
VTCLX (Vanguard Tax-Managed Capital Appreciation)
MGC (Vanguard Mega Cap)
Stillwater1971
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by Stillwater1971 »

mrjohnanderson007 wrote: Sat Jul 31, 2021 8:37 am
dbr wrote: Sat Jul 31, 2021 7:23 am
As a thrifty person and boglehead I prefer to buy things on sale, or at reasonable market levels. I think most people would agree the markets are a little crazy right now.

When the markets tanked from covid I was buying in huge amounts. It was heaven... I also live the life I love on around $7,500 a year. Volatility is not a concern.
Mr. Anderson, I have a curious question I would like to ask please?!

How in the @#$% do you manage to spend $625 a month/$7500 a year? LOL But seriously, I am frugal too, so without prying too much into your private life, how do you manage that? All assets paid off, single while living in Mexico?
Topic Author
mrjohnanderson007
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by mrjohnanderson007 »

Stillwater1971 wrote: Sun Aug 01, 2021 10:07 am
mrjohnanderson007 wrote: Sat Jul 31, 2021 8:37 am
dbr wrote: Sat Jul 31, 2021 7:23 am
As a thrifty person and boglehead I prefer to buy things on sale, or at reasonable market levels. I think most people would agree the markets are a little crazy right now.

When the markets tanked from covid I was buying in huge amounts. It was heaven... I also live the life I love on around $7,500 a year. Volatility is not a concern.
Mr. Anderson, I have a curious question I would like to ask please?!

How in the @#$% do you manage to spend $625 a month/$7500 a year? LOL But seriously, I am frugal too, so without prying too much into your private life, how do you manage that? All assets paid off, single while living in Mexico?
Maybe it's cheating to say that because we are all in a different situation. I'm not using any secret sauce...

Basics:
35 year old single male, minimalist, no debt, never married, live in rural area.

Vehicle:
Drive a newer ford focus hatchback (15k brand new) that gets 38-44MPG on E30 ($2.53 a gallon). Have a set of $100 used rims and new winter tires to get through winters.

Housing:
House is paid for. Made basement into mother in law unit. Two roommates, one lives in basement, one lives same level as me. I turn down 10-20 people before I choose who I want, then end up with a roommate that is super cool and is also never here. They basically pay for all housing expenses.

Medical:
Depends. Employer, or no insurance, or eventually income based and keep income low.

Food:
Food $2-$4 a day and I eat great. Walmart and Aldi are your friends... Heck, I know a place that still sells ground beef (75% lean) for .99cents a lb. Also gardening, foraging for mushrooms, berries, canning, freezing, neighbors with hobby farms (help out to get free goat milk, eggs, et) Coffee .05-.08 cents a day.

Personal:
Introvert that enjoys doing his own thing. Kind of follow the "Men Going Their Own Way" theme. I've dated but 99% of women are only interested if they have something to gain. Experiences, knowledge, story telling, money, material for their blogs, Instagram, etc. Save money from dating unless extremely interested.

Flying:
Haven't been anywhere in awhile but sister is a flight attendant, brother is a pilot. Get benefits from them. Then there's credit card rewards that make flying cheaper. Room and board at hostels, couch surfing, meet people, or volunteer somewhere cool.

Hobbies:
The great outdoors cost almost nothing. Rock climbing, hiking, mountains, xc skiing, sleep in car, stealth camp, or state forest are free camping.

Weakness: The one weakness I have is I do enjoy a good adventure bike. Say a used Honda NC700 for $4,000 or Honda African Twin for $8,000. Load up the hiking and camping gear and hit the mountains for a week or two. Or a day trip foraging. They get 50-65mpg and run on 87 octane. Not too expensive to operate.
Stillwater1971
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by Stillwater1971 »

mrjohnanderson007 wrote: Sun Aug 01, 2021 2:42 pm
Stillwater1971 wrote: Sun Aug 01, 2021 10:07 am
mrjohnanderson007 wrote: Sat Jul 31, 2021 8:37 am
dbr wrote: Sat Jul 31, 2021 7:23 am
As a thrifty person and boglehead I prefer to buy things on sale, or at reasonable market levels. I think most people would agree the markets are a little crazy right now.

When the markets tanked from covid I was buying in huge amounts. It was heaven... I also live the life I love on around $7,500 a year. Volatility is not a concern.
Mr. Anderson, I have a curious question I would like to ask please?!

How in the @#$% do you manage to spend $625 a month/$7500 a year? LOL But seriously, I am frugal too, so without prying too much into your private life, how do you manage that? All assets paid off, single while living in Mexico?
Maybe it's cheating to say that because we are all in a different situation. I'm not using any secret sauce...

Basics:
35 year old single male, minimalist, no debt, never married, live in rural area.

Vehicle:
Drive a newer ford focus hatchback (15k brand new) that gets 38-44MPG on E30 ($2.53 a gallon). Have a set of $100 used rims and new winter tires to get through winters.

Housing:
House is paid for. Made basement into mother in law unit. Two roommates, one lives in basement, one lives same level as me. I turn down 10-20 people before I choose who I want, then end up with a roommate that is super cool and is also never here. They basically pay for all housing expenses.

Medical:
Depends. Employer, or no insurance, or eventually income based and keep income low.

Food:
Food $2-$4 a day and I eat great. Walmart and Aldi are your friends... Heck, I know a place that still sells ground beef (75% lean) for .99cents a lb. Also gardening, foraging for mushrooms, berries, canning, freezing, neighbors with hobby farms (help out to get free goat milk, eggs, et) Coffee .05-.08 cents a day.

Personal:
Introvert that enjoys doing his own thing. Kind of follow the "Men Going Their Own Way" theme. I've dated but 99% of women are only interested if they have something to gain. Experiences, knowledge, story telling, money, material for their blogs, Instagram, etc. Save money from dating unless extremely interested.

Flying:
Haven't been anywhere in awhile but sister is a flight attendant, brother is a pilot. Get benefits from them. Then there's credit card rewards that make flying cheaper. Room and board at hostels, couch surfing, meet people, or volunteer somewhere cool.

Hobbies:
The great outdoors cost almost nothing. Rock climbing, hiking, mountains, xc skiing, sleep in car, stealth camp, or state forest are free camping.

Weakness: The one weakness I have is I do enjoy a good adventure bike. Say a used Honda NC700 for $4,000 or Honda African Twin for $8,000. Load up the hiking and camping gear and hit the mountains for a week or two. Or a day trip foraging. They get 50-65mpg and run on 87 octane. Not too expensive to operate.
Well, I stand corrected! lol
I'm almost 15 years older than you, but I have a similar lifestyle. I try to be frugal as best I can. A little tough trying to teach that to my 15 year old son who lives with me.! The big difference is housing as mine is not paid off. If I subtract the monthly mortgage, I'm spending only around $800 in bills. Planning to make a lifestyle change there by moving in with my mom in the next year or so who wants my company.

It seems to help have connections and networking with others. That part has been hard for me since my divorce many years ago.

I can relate with being an Introvert. 100% happy being single too and sadly, I've experienced the same with dating women (sorry ladies, I'm sure there are cons with us men too). Never heard of "Men Going their own Way", had to Google it and realizing I am unwittingly going down that path. lol
Is there a book or person you follow for advice like this?

Your weakness is definitely cool. After watching the Ewan McGregor Long Way Up and Long Way down, adventure bikes are extremely tempting.

Thanks for sharing and the inspiration!
Topic Author
mrjohnanderson007
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by mrjohnanderson007 »

Stillwater1971 wrote: Sun Aug 01, 2021 3:05 pm



Well, I stand corrected! lol
I'm almost 15 years older than you, but I have a similar lifestyle. I try to be frugal as best I can. A little tough trying to teach that to my 15 year old son who lives with me.! The big difference is housing as mine is not paid off. If I subtract the monthly mortgage, I'm spending only around $800 in bills. Planning to make a lifestyle change there by moving in with my mom in the next year or so who wants my company.

It seems to help have connections and networking with others. That part has been hard for me since my divorce many years ago.

I can relate with being an Introvert. 100% happy being single too and sadly, I've experienced the same with dating women (sorry ladies, I'm sure there are cons with us men too). Never heard of "Men Going their own Way", had to Google it and realizing I am unwittingly going down that path. lol
Is there a book or person you follow for advice like this?

Your weakness is definitely cool. After watching the Ewan McGregor Long Way Up and Long Way down, adventure bikes are extremely tempting.

Thanks for sharing and the inspiration!
Oh dang cool I've never heard of that tv series. Looks like an apple exclusive, guess that's why :oops: . My father is SUPER into it and has a handful of KTMs, BMWs and such. This would be a great series to watch with him. Looks like there is another called "Long Way Round".

Regarding "Men Going their own way". The first I heard of it was when listening to a Jordan Peterson lecture on youtube, or maybe one of the times he was on the Joe Rogan show. After that looked at the (MGTOW) website and could totally relate but never went down their rabbit hole. Jordan Peterson is a great listen, if you haven't already, check him out.

Would your son listen to audio books or read? You could introduce him to the book rich dad poor dad. It would be a start to breaking free from being a slave to materials his entire life. The need to spend money to be happy and cool. BREAK FREE FROM THE MATRIX :D

To start building a network volunteer doing what you want. I messaged a vineyard this weekend telling them I will help with harvest or do whatever for free. Worst case I learn more about making wine and growing grapes. Maybe they throw a few bottles of wine my way :sharebeer
lazynovice
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by lazynovice »

mrjohnanderson007 wrote: Sun Aug 01, 2021 9:39 am These are the funds that preform almost identical to VTSAX (Vanguard Total U.S) and have similar tax efficient dividend returns (little more research needed to double check figures). I think using two of these as TLH partners would be easiest route.


VLCAX (Vanguard Large Cap)
VTCLX (Vanguard Tax-Managed Capital Appreciation)
MGC (Vanguard Mega Cap)
Do you have any objections to ETFs?

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

VTI (VTSAX’s twin), SCHB (Schwab), ITOT (Blackrock) would work or if they are too close in your book, you could do VTI and VOO (S&P 500).
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Raraculus
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by Raraculus »

mrjohnanderson007 wrote: Fri Jul 30, 2021 4:01 pmSecond. I see many posts here regarding people worrying about lump sum investing a windfall. I have a windfall of $60k and like them, am afraid to lump sum in this crazy market even though I know statistically lump sum is superior over DCA (dollar cost averaging). If I was to buy in at the very top of the market today with 60k. Markets tank 50%. Sell for 30k. Buy back. I would have 30k of TLH for the next 10 years (3k is the max per year). Does my logic make sense in helping me, and others pull the trigger to lump sum?
I like the way you think.

Unfortunately, this thought experiment may be impractical due to bigger numbers over a smaller number problem.

What if you had $150K to lumpsum? A 50% drop will lose you 75K, and dividing it by 3K (per year) nets you 25 years of TLH deductible losses. $250K? 500K? Might as well as give you 100+ years of TLH deductible losses. The numbers simply get too big because of the smaller figure - max 3K deduction.

Another problem is that a person approaching retirement may not have meaningful opportunities to deduct TLH losses in future tax years.

For better or worse, the eternal question of whether to lumpsum or DCA is purely a personal decision, and will forever be debated here. :beer
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cchrissyy
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by cchrissyy »

the 3k annual limit is for deducting against your other income. i think you can use it up all at once if you ever have a year with enough capital gains, such as from selling investments or real estate.
60-20-20 us-intl-bond
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Raraculus
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Re: When lump sum in hot market think of TLH as a little downside protection?

Post by Raraculus »

cchrissyy wrote: Thu Aug 05, 2021 1:39 pmthe 3k annual limit is for deducting against your other income. i think you can use it up all at once if you ever have a year with enough capital gains, such as from selling investments or real estate.
Hmmm, that is interesting. Does change my thinking regarding TLH if I can claim more than 3K against short/long term investment gains in subsequent years.
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