Sell SCHF for loss or wait for dividends?

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Topic Author
nrkv
Posts: 247
Joined: Thu Jan 21, 2021 1:34 pm

Sell SCHF for loss or wait for dividends?

Post by nrkv »

Hello,
I have SCHF(Schwab international developed market) fund and couple hundred of them are in losses. Should I capture short term losses now to offset gains this year? Or wait for few weeks for dividends distribution and leave as is or sell if it is still in losses?

Please note that this is not a coming out of international funds discussion because I would reinvest in SPDW or something. Thanks.
Dave55
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Re: Sell SCHF for loss or wait for dividends?

Post by Dave55 »

I would not tax loss for a few hundred.

Dave
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nalor511
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Re: Sell SCHF for loss or wait for dividends?

Post by nalor511 »

I would just swap it over to VEA or VXUS or IXUS, takes 45 seconds
drk
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Re: Sell SCHF for loss or wait for dividends?

Post by drk »

nrkv wrote: Sat Nov 27, 2021 12:05 pm Or wait for few weeks for dividends distribution and leave as is or sell if it is still in losses?
I would do this since the fund only distributes once twice a year. If you can use the capital loss, you might as well replace it with VEA, SPDW, or IDEV.
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Nate79
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Re: Sell SCHF for loss or wait for dividends?

Post by Nate79 »

nrkv wrote: Sat Nov 27, 2021 12:05 pm Hello,
I have SCHF(Schwab international developed market) fund and couple hundred of them are in losses. Should I capture short term losses now to offset gains this year? Or wait for few weeks for dividends distribution and leave as is or sell if it is still in losses?

Please note that this is not a coming out of international funds discussion because I would reinvest in SPDW or something. Thanks.
Why would you wait for the dividends? That will just cost you more in taxes (on those dividends) with nothing to show for it (the fund price drops by the amount of the dividend, its net neutral).
UpperNwGuy
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Re: Sell SCHF for loss or wait for dividends?

Post by UpperNwGuy »

Why sell SCHF? It's a great fund.
livesoft
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Re: Sell SCHF for loss or wait for dividends?

Post by livesoft »

Yes, tax-loss harvest now. Do not wait. The historical drop in the market is a signal to TLH now. Besides, if the replacement shares (SPDW, VEA, whatever) drop by 12/31, then you will be able to TLH them back into your Schwab fund this tax year because 30 days will have passed.
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ofckrupke
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Re: Sell SCHF for loss or wait for dividends?

Post by ofckrupke »

livesoft wrote: Sat Nov 27, 2021 4:19 pm Yes, tax-loss harvest now. Do not wait. The historical drop in the market is a signal to TLH now. Besides, if the replacement shares (SPDW, VEA, whatever) drop by 12/31, then you will be able to TLH them back into your Schwab fund this tax year because 30 days will have passed.
That reads like a potential blunder to me because the likely intervening dividend from the replacement shares would be taxed 100% as non-qualified because of the sub 61 day holding period - whereas depending upon the details of previously realized gains in 2021, the portion of said loss attributable to the dividend might end up offsetting LT gains that would otherwise have been taxed at a favorable rate. If SCHF takes the same path but is held through the ex-div date then the OP might or might not end up being able to offset the portion of the loss attributable to the dividend against earned income, but in any case (barring the remote chance that these shares are currently less than ~30-45 days held), 75-90% of the SCHF dividend will be qualified and taxed at the preferred rate.
livesoft
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Re: Sell SCHF for loss or wait for dividends?

Post by livesoft »

ofckrupke wrote: Sat Nov 27, 2021 5:58 pm That reads like a potential blunder to me because the likely intervening dividend from the replacement shares would be taxed 100% as non-qualified because of the sub 61 day holding period - whereas depending upon the details of previously realized gains in 2021, the portion of said loss attributable to the dividend might end up offsetting LT gains that would otherwise have been taxed at a favorable rate. [....]
What you write is true, but the potential difference in taxes could easily be calculated. The calculations might show that the extra taxes amount to less than $10.
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Topic Author
nrkv
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Re: Sell SCHF for loss or wait for dividends?

Post by nrkv »

ofckrupke wrote: Sat Nov 27, 2021 5:58 pm
livesoft wrote: Sat Nov 27, 2021 4:19 pm Yes, tax-loss harvest now. Do not wait. The historical drop in the market is a signal to TLH now. Besides, if the replacement shares (SPDW, VEA, whatever) drop by 12/31, then you will be able to TLH them back into your Schwab fund this tax year because 30 days will have passed.
That reads like a potential blunder to me because the likely intervening dividend from the replacement shares would be taxed 100% as non-qualified because of the sub 61 day holding period - whereas depending upon the details of previously realized gains in 2021, the portion of said loss attributable to the dividend might end up offsetting LT gains that would otherwise have been taxed at a favorable rate. If SCHF takes the same path but is held through the ex-div date then the OP might or might not end up being able to offset the portion of the loss attributable to the dividend against earned income, but in any case (barring the remote chance that these shares are currently less than ~30-45 days held), 75-90% of the SCHF dividend will be qualified and taxed at the preferred rate.
Thank you for the details. I’m trying to offset STCG with STCL from this sale. The said SCHF funds were bought in September this year, so the December dividends would be qualified, at whatever rate Schwab qualifies.
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nrkv
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Re: Sell SCHF for loss or wait for dividends?

Post by nrkv »

livesoft wrote: Sat Nov 27, 2021 10:28 pm
ofckrupke wrote: Sat Nov 27, 2021 5:58 pm That reads like a potential blunder to me because the likely intervening dividend from the replacement shares would be taxed 100% as non-qualified because of the sub 61 day holding period - whereas depending upon the details of previously realized gains in 2021, the portion of said loss attributable to the dividend might end up offsetting LT gains that would otherwise have been taxed at a favorable rate. [....]
What you write is true, but the potential difference in taxes could easily be calculated. The calculations might show that the extra taxes amount to less than $10.
Yes, let me do the math. I calculated the lost income from SCHF dividends (minus taxes) by selling now but forgot that the replacement shares have dividend date in December. Thank you for the response.
Topic Author
nrkv
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Re: Sell SCHF for loss or wait for dividends?

Post by nrkv »

UpperNwGuy wrote: Sat Nov 27, 2021 4:02 pm Why sell SCHF? It's a great fund.
It is. The sell for this year is to offset STCG.
livesoft
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Re: Sell SCHF for loss or wait for dividends?

Post by livesoft »

You don't "lose" the dividends if you sell before the dividends are paid since the dividends are included in the share price before they are paid. There is no "lost income."
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Topic Author
nrkv
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Re: Sell SCHF for loss or wait for dividends?

Post by nrkv »

Nate79 wrote: Sat Nov 27, 2021 3:53 pm
nrkv wrote: Sat Nov 27, 2021 12:05 pm Hello,
I have SCHF(Schwab international developed market) fund and couple hundred of them are in losses. Should I capture short term losses now to offset gains this year? Or wait for few weeks for dividends distribution and leave as is or sell if it is still in losses?

Please note that this is not a coming out of international funds discussion because I would reinvest in SPDW or something. Thanks.
Why would you wait for the dividends? That will just cost you more in taxes (on those dividends) with nothing to show for it (the fund price drops by the amount of the dividend, its net neutral).
If my goal for this year is to offset STCG and during dividend time when the price goes down by dividend amount, wouldn’t I be offsetting more gains with bigger losses?
FYI, There was a blunder early this year that resulted in high amount of STCG. Thanks for the response.
ofckrupke
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Re: Sell SCHF for loss or wait for dividends?

Post by ofckrupke »

The ex-date for SCHF is ten days from now and from the fund's recent twice-annual dividend history it looks like the Dec dividend should be between 1.6 and 2%. Since you agree upthread to calculate you probably know the difference between your marginal rates on LTCG/QDIV and on other income. Sounds like livesoft would skip the small tax arbitrage opportunity to sell tomorrow...to be able to report triumph over primal/behavioural resistance to loss acknowledgment, possibly. I'd wait for the ex-date....unless at some earlier date SCHF could be sold at a price whose booked loss got me away from a really nasty AGI cliff (in this case waiting until the replacement fund's ex-date to buy despite the peril of missed opportunity represented there).
livesoft
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Re: Sell SCHF for loss or wait for dividends?

Post by livesoft »

If one sells SCHF and buys the replacement shares that pay a dividend in December, one can always hold the replacement shares long enough to keep any percentage of the dividend that is qualified still qualified. Besides, if the replacement shares gain in value, one is not going to sell them in 2021 anyways. However, if they drop in value the ability to sell them before year-end is a bonus.
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