Tax Loss Harvesting

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fetch5482
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Re: Tax Loss Harvesting

Post by fetch5482 »

throw123112 wrote: Thu Jan 20, 2022 9:17 pm Could you tax loss more frequently than every 31 days?
Yes. As long as you are not creating wash sales, you can go bonkers - the sky is the limit.
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throw123112
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Re: Tax Loss Harvesting

Post by throw123112 »

gas_balloon wrote: Thu Jan 20, 2022 9:39 pm There are two styles to Tax Lost Harvesting: The Walmart style and the Costco style.

Walmart style - try to tax lost every little amount you can. Most people do it at 1000 - 3000 dollars to avoid market movements causing them to accidentally sell at profit (especially for index funds that trade after close of market). You will do a few TLH transactions in most years.

Costco style - Do one large TLH when market dips significantly and there are substantial losses to harvest - usually $30-40K plus in my case. You are good for the next several years until the next opportunity arises.

(well, actually there is a third style, the J.C.Penney style where you never harvest ever!)

I am the "Costco style" person. I did a big TLH in March/April 2020 timeframe that will likely last me a few more years. I find this as a good balance between being hands-off and trying to find opportunities all the time. I probably have a few TLH opportunities right now, but they add up to couple thousand dollars - not worth my time right now given I have enough carry over left to claim this year already.
I guess it depends on how much you value your time. If I can get an $800 tax credit (even if it takes a year or two or three to materialize) for 30 minutes of work I'm going to do it. Per your description of the Walmart vs. Costco style, you have to value your time at a very high rate to only justify doing tax loss harvesting the "Costco" style. I think for the vast majority of Americans and people on this board, they don't make that much money per hour that they should avoid tax loss harvesting for even a couple thousand dollars.
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fetch5482
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Re: Tax Loss Harvesting

Post by fetch5482 »

throw123112 wrote: Thu Jan 20, 2022 9:51 pm I guess it depends on how much you value your time. If I can get an $800 tax credit (even if it takes a year or two or three to materialize) for 30 minutes of work I'm going to do it. Per your description of the Walmart vs. Costco style, you have to value your time at a very high rate to only justify doing tax loss harvesting the "Costco" style. I think for the vast majority of Americans and people on this board, they don't make that much money per hour that they should avoid tax loss harvesting for even a couple thousand dollars.
It's not really that. The $3,000 limit means that unless you're constantly selling other stocks for capital gains, that 30-40k losses will last you a good 10 years. There is simply no reason in that scenario to "nickle and dime" for a few hundred dollars of losses. By the time I'm done claiming all those losses, another opportunity almost always pops up. I've been investing since 2004 and harvesting losses since 2008. The 2008-09 crash TLH lasted me almost 5-6 years. There were opportunities in 2013-14, then again December 2018, Mar 2020. There hasn't been a single year since 2008 where I haven't claimed my full 3000 loss due to the carry over. If the current downward trend continues for say another 10-15%, I'll likely get my Costco-sized TLH this year as well, while having 20k of TLH carryover still in the kitty.

Now if you're someone who sells other stocks for gains, surely those 800-1000 dollar losses can come in handy since you're likely to claim those TLH losses against capital gains faster. That simply doesn't apply to me.

IOW, for buy-and-hold investors who are not selling for profit during accumulation phase, the Costco type TLH works great. That's me.

For folks who get significant capital gains from other means (either by selling company RSUs or being in withdrawal phase), the Walmart style may work better.

I use the Webull app to notify me when the ETFs I hold in taxable reaches a certain price point. I calculate this usually when I purchase large lots, so when the notification shows up, I simply act on it by selling lots with cost basis above the notification price.

Ad an example, I recently purchased VTI in taxable for $80,000 for $227. I set an alert for price going to $170. When that happens, I'll just sell that full lot at a ~$20K loss.
It's possibly in 1 month from now VTI guess to 190 then recovers in which case I miss my opportunity, but now I don't need to look at VTI prices too often to hunt for these TLH opportunity. Basically my method assumes that markets will drop 15+% every few years (which has been true since I started harvesting) to maximize the 3K claims.
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throw123112
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Re: Tax Loss Harvesting

Post by throw123112 »

[
gas_balloon wrote: Thu Jan 20, 2022 11:14 pm
throw123112 wrote: Thu Jan 20, 2022 9:51 pm I guess it depends on how much you value your time. If I can get an $800 tax credit (even if it takes a year or two or three to materialize) for 30 minutes of work I'm going to do it. Per your description of the Walmart vs. Costco style, you have to value your time at a very high rate to only justify doing tax loss harvesting the "Costco" style. I think for the vast majority of Americans and people on this board, they don't make that much money per hour that they should avoid tax loss harvesting for even a couple thousand dollars.
It's not really that. The $3,000 limit means that unless you're constantly selling other stocks for capital gains, that 30-40k losses will last you a good 10 years. There is simply no reason in that scenario to "nickle and dime" for a few hundred dollars of losses. By the time I'm done claiming all those losses, another opportunity almost always pops up. I've been investing since 2004 and harvesting losses since 2008. The 2008-09 crash TLH lasted me almost 5-6 years. There were opportunities in 2013-14, then again December 2018, Mar 2020. There hasn't been a single year since 2008 where I haven't claimed my full 3000 loss due to the carry over. If the current downward trend continues for say another 10-15%, I'll likely get my Costco-sized TLH this year as well, while having 20k of TLH carryover still in the kitty.

Now if you're someone who sells other stocks for gains, surely those 800-1000 dollar losses can come in handy since you're likely to claim those TLH losses against capital gains faster. That simply doesn't apply to me.

IOW, for buy-and-hold investors who are not selling for profit during accumulation phase, the Costco type TLH works great. That's me.

For folks who get significant capital gains from other means (either by selling company RSUs or being in withdrawal phase), the Walmart style may work better.

I use the Webull app to notify me when the ETFs I hold in taxable reaches a certain price point. I calculate this usually when I purchase large lots, so when the notification shows up, I simply act on it by selling lots with cost basis above the notification price.

Ad an example, I recently purchased VTI in taxable for $80,000 for $227. I set an alert for price going to $170. When that happens, I'll just sell that full lot at a ~$20K loss.
It's possibly in 1 month from now VTI guess to 190 then recovers in which case I miss my opportunity, but now I don't need to look at VTI prices too often to hunt for these TLH opportunity. Basically my method assumes that markets will drop 15+% every few years (which has been true since I started harvesting) to maximize the 3K claims.


Very helpful, thanks so much!
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Re: Tax Loss Harvesting

Post by eye.surgeon »

When it comes to tax loss harvesting, I employ the bend-it-over-and-pick-it-up strategy. If the amount I could TLH is an amount that I would bother to bend over and pick up off the ground if I saw it on the sidewalk, I'll probably do it. It's free money, it takes 5 minutes, why would I not do it.
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Re: Tax Loss Harvesting

Post by Lee_WSP »

Loss harvesting is difficult and complex and may not be worth it in all situations.
Last edited by Lee_WSP on Fri Jan 21, 2022 10:51 am, edited 1 time in total.
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iceport
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Re: Tax Loss Harvesting

Post by iceport »

Lee_WSP wrote: Fri Jan 21, 2022 1:41 am It's not worth harvesting long term losses. They only offset long term gains.
That's not at all true. Both of those two sentences are false.

Long term losses offset long term gains *first*, then they offset any short term gains, then they offset up to $3000 of ordinary income, and then any leftover long term losses carryover to the next year.

It's quite possible to use up long term losses by offsetting only short term gains and/or ordinary income, without ever offsetting *any* long term gains, if there are no long term gains to offset.
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fetch5482
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Re: Tax Loss Harvesting

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iceport wrote: Fri Jan 21, 2022 2:22 am
Long term losses offset long term gains *first*, then they offset any short term gains, then they offset up to $3000 of ordinary income, and then any leftover long term losses carryover to the next year.

It's quite possible to use up long term losses by offsetting only short term gains and/or ordinary income, without ever offsetting *any* long term gains, if there are no long term gains to offset.
+1 this is the correct summary.
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throw123112
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Re: Tax Loss Harvesting

Post by throw123112 »

eye.surgeon wrote: Fri Jan 21, 2022 12:41 am When it comes to tax loss harvesting, I employ the bend-it-over-and-pick-it-up strategy. If the amount I could TLH is an amount that I would bother to bend over and pick up off the ground if I saw it on the sidewalk, I'll probably do it. It's free money, it takes 5 minutes, why would I not do it.
I like this approach and completely agree with it.
iceport wrote: Fri Jan 21, 2022 2:22 am
Lee_WSP wrote: Fri Jan 21, 2022 1:41 am It's not worth harvesting long term losses. They only offset long term gains.
That's not at all true. Both of those two sentences are false.

Long term losses offset long term gains *first*, then they offset any short term gains, then they offset up to $3000 of ordinary income, and then any leftover long term losses carryover to the next year.

It's quite possible to use up long term losses by offsetting only short term gains and/or ordinary income, without ever offsetting *any* long term gains, if there are no long term gains to offset.
+2 for iceport. Excellent and correct info.
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iceport
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Re: Frequency of Tax Loss Harvesting

Post by iceport »

throw123112 wrote: Thu Jan 20, 2022 7:29 pm How often are you guys tax loss harvesting? Is there a specific threshold at which you act? Is there a systematic way that you pursue this? Any thoughts are welcome.
I don't have any hard and fast rules, but instead just wing it. So it depends on lots of various factors, like the dollar value of the loss, how much incidental work is involved (possibly including buying and selling at other account custodians), whether I'd be adding another fund (and thus complexity) to the portfolio, whether I have a strong preference for the losing fund and would prefer not to get locked into a replacement for the long term, how busy my life is at the time, etc.

The big dollar losses are a no-brainer. But then they come along few and far between after a while for a passive investor like me.

I have a relatively minor short term bond holding in a taxable account that I TLH'd many times, going back and forth between two Vanguard funds that are practically indistinguishable in characteristics and performance, but one is actively managed and one is an index fund. So the substitute fund was equally as attractive to me, and I was able to sell the entire position each time. I nickel-and-dimed the TLH procedure until I scraped together most of the $3k annual income offset.

Now, a year or two later, the same fund has ~$600 in losses. I would have snatched up that loss before, but now is different, and I'm not bothering. Why? Two reasons, really. First, after all this time, the losses are now intermixed with gains, so I'd be left holding two ST bond positions instead of one. Additionally, there were several thousands of dollars of capital gains that had built up in the fund (though those have been melting away rapidly, this month especially), and because the ST bond fund is earmarked for home improvements, I see any losses in that holding as a good way to offset any gains that will be realized in a near-term liquidation.

So same fund, same account, same dollar value of the loss, but a different decision depending on the rest of the circumstances.
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Re: Tax Loss Harvesting

Post by livesoft »

Let me throw a wrench into what iceport wrote.

Long-term (and short-term) losses first adjust the cost basis of other shares purchased in the preceding 30 days or the following 30 days. :twisted:

Then those things that iceport wrote apply.

Please insert the phrase "substantially identical" in the appropriate place.
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Re: Frequency of Tax Loss Harvesting

Post by throw123112 »

iceport wrote: Fri Jan 21, 2022 6:21 am
throw123112 wrote: Thu Jan 20, 2022 7:29 pm How often are you guys tax loss harvesting? Is there a specific threshold at which you act? Is there a systematic way that you pursue this? Any thoughts are welcome.
I don't have any hard and fast rules, but instead just wing it. So it depends on lots of various factors, like the dollar value of the loss, how much incidental work is involved (possibly including buying and selling at other account custodians), whether I'd be adding another fund (and thus complexity) to the portfolio, whether I have a strong preference for the losing fund and would prefer not to get locked into a replacement for the long term, how busy my life is at the time, etc.

The big dollar losses are a no-brainer. But then they come along few and far between after a while for a passive investor like me.

I have a relatively minor short term bond holding in a taxable account that I TLH'd many times, going back and forth between two Vanguard funds that are practically indistinguishable in characteristics and performance, but one is actively managed and one is an index fund. So the substitute fund was equally as attractive to me, and I was able to sell the entire position each time. I nickel-and-dimed the TLH procedure until I scraped together most of the $3k annual income offset.

Now, a year or two later, the same fund has ~$600 in losses. I would have snatched up that loss before, but now is different, and I'm not bothering. Why? Two reasons, really. First, after all this time, the losses are now intermixed with gains, so I'd be left holding two ST bond positions instead of one. Additionally, there were several thousands of dollars of capital gains that had built up in the fund (though those have been melting away rapidly, this month especially), and because the ST bond fund is earmarked for home improvements, I see any losses in that holding as a good way to offset any gains that will be realized in a near-term liquidation.

So same fund, same account, same dollar value of the loss, but a different decision depending on the rest of the circumstances.
In Vanguard you can set tax accounting such that it’s high in first out. That way you could cherry pick and sell your losers and incur capital losses without having to worry about capital gains.
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Re: Tax Loss Harvesting

Post by iceport »

livesoft wrote: Fri Jan 21, 2022 6:22 am Let me throw a wrench into what iceport wrote.

Long-term (and short-term) losses first adjust the cost basis of other shares purchased in the preceding 30 days or the following 30 days. :twisted:

Then those things that iceport wrote apply.

Please insert the phrase "substantially identical" in the appropriate place.
True!

(I'm just glad I fixed the typos before livesoft woke up, or he'd really be hitting me with that wrench! :) )
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iceport
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Re: Frequency of Tax Loss Harvesting

Post by iceport »

throw123112 wrote: Fri Jan 21, 2022 6:33 am In Vanguard you can set tax accounting such that it’s high in first out. That way you could cherry pick and sell your losers and incur capital losses without having to worry about capital gains.
Yes, sure. It's not that I'd be realizing gains now, but I'd still be left with two funds instead of one, and I still expect some gains in a near-term liquidation. So I have another plan for those losses now.

If it all goes red, I'll TLH again, without hesitation.
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Re: Tax Loss Harvesting

Post by AnEngineer »

gas_balloon wrote: Thu Jan 20, 2022 11:14 pm For folks who get significant capital gains from other means (either by selling company RSUs or being in withdrawal phase), the Walmart style may work better.
ESPP shares make more sense than RSUs. The general good advice is to sell the latter immediately.
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Re: Tax Loss Harvesting

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rkhusky wrote: Thu Jan 20, 2022 6:48 pm
placeholder wrote: Thu Jan 20, 2022 2:00 pm It still says securities.
Bonds.
Are you claiming that mutual funds are not securities and if they are not then I don't see anything in the wash sale rules that would apply to mutual funds at all as they aren't mentioned specifically.
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Re: Tax Loss Harvesting

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iceport wrote: Thu Jan 20, 2022 2:23 pm
Fine, but "all the facts and circumstances" cast a pretty wide net.
Yes and that means that you can't ignore issuing company and focus only on index remembering that "substantially identical" is a high bar and almost anything significant should make two securities not meet it.
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Re: Tax Loss Harvesting

Post by ForeverInvestorILL »

I’m hoping to get some clarification on my understanding of TLH (first timer so please give the newbie a break):

-Brokerage buy on 1/3 (All VTSAX, only fund in the account)
-Brokerage auto buy on 5th of every month going forward (All VTSAX, only fund in account), next buy 2/5, then 3/5, etc.
-Maxed out Roth on 1/5 (Half VTIAX, Half VTSAX, two funds in account)
-Maxed out wife’s Roth on 1/5 (All VTSAX, only fund in account)
-HSA auto buy on 15th & 30th of every month (All FZROX, only fund in account)
-401K in TDF so no considerations there

Based on the above, is it accurate that currently the earliest I am able to TLH is Feb 6th (31 days after last VTSAX purchase in any account [Roth]?

Also, if I make the brokerage auto buy on 2/5 and that lot has a loss, I’ll basically have a window to TLH from then until Feb 21st or so because usually the Q1 dividend for VTSAX is around March 22nd. I know I can turn off dividend reinvestment if needed.

Lastly, any issues with TLH/wash sale when holding VTSAX in Vanguard accounts [Brokerage/Roth] and FZROX at Fidelity [HSA] and auto buying every 15 days?
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fetch5482
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Re: Tax Loss Harvesting

Post by fetch5482 »

ForeverInvestorILL wrote: Sat Jan 22, 2022 7:38 am -Brokerage buy on 1/3 (All VTSAX, only fund in the account)
-Brokerage auto buy on 5th of every month going forward (All VTSAX, only fund in account), next buy 2/5, then 3/5, etc.
-Maxed out Roth on 1/5 (Half VTIAX, Half VTSAX, two funds in account)
-Maxed out wife’s Roth on 1/5 (All VTSAX, only fund in account)
-HSA auto buy on 15th & 30th of every month (All FZROX, only fund in account)
-401K in TDF so no considerations there

Based on the above, is it accurate that currently the earliest I am able to TLH is Feb 6th (31 days after last VTSAX purchase in any account [Roth]?
The answer here depends on which tax lots you're selling. It's possibly to TLH within the 30 days window and still not incur wash sales if you sell the full lot you had purchased in that window and don't re-buy replacement lots again for 30 days.
I suggest fully reading this article with examples of that scenario.
https://obliviousinvestor.com/tax-loss-harvesting/
Also, if I make the brokerage auto buy on 2/5 and that lot has a loss, I’ll basically have a window to TLH from then until Feb 21st or so because usually the Q1 dividend for VTSAX is around March 22nd. I know I can turn off dividend reinvestment if needed.
Again the answer depends. You cannot TLH a different tax lot until April 22 in this case because you bought a lot on 2/5, so selling another lot until 3/4 will be a wash sale. Then because of reinvestment purchasing on 3/22, you cannot sell a different lot from 2/22 to 4/21 without creating wash sale.
Lastly, any issues with TLH/wash sale when holding VTSAX in Vanguard accounts [Brokerage/Roth] and FZROX at Fidelity [HSA] and auto buying every 15 days?
I personally think fzrox and vtsax are not substantially identical because fzrox holds far fewer companies/stocks than vtsax (~2,600 vs 4,100).. So I believe you'd be fine, but as it has been discussed in this thread earlier, IRS has never bothered to define what substantially identical means, so it's possible our definitions don't align with how IRS thinks about it. I think most folks in this forum will consider VTSAX and FZROX to not be substantially identical.
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Re: Tax Loss Harvesting

Post by ForeverInvestorILL »

gas_balloon wrote: Sat Jan 22, 2022 10:19 am
ForeverInvestorILL wrote: Sat Jan 22, 2022 7:38 am -Brokerage buy on 1/3 (All VTSAX, only fund in the account)
-Brokerage auto buy on 5th of every month going forward (All VTSAX, only fund in account), next buy 2/5, then 3/5, etc.
-Maxed out Roth on 1/5 (Half VTIAX, Half VTSAX, two funds in account)
-Maxed out wife’s Roth on 1/5 (All VTSAX, only fund in account)
-HSA auto buy on 15th & 30th of every month (All FZROX, only fund in account)
-401K in TDF so no considerations there

Based on the above, is it accurate that currently the earliest I am able to TLH is Feb 6th (31 days after last VTSAX purchase in any account [Roth]?
The answer here depends on which tax lots you're selling. It's possibly to TLH within the 30 days window and still not incur wash sales if you sell the full lot you had purchased in that window and don't re-buy replacement lots again for 30 days.
I suggest fully reading this article with examples of that scenario.
https://obliviousinvestor.com/tax-loss-harvesting/
Also, if I make the brokerage auto buy on 2/5 and that lot has a loss, I’ll basically have a window to TLH from then until Feb 21st or so because usually the Q1 dividend for VTSAX is around March 22nd. I know I can turn off dividend reinvestment if needed.
Again the answer depends. You cannot TLH a different tax lot until April 22 in this case because you bought a lot on 2/5, so selling another lot until 3/4 will be a wash sale. Then because of reinvestment purchasing on 3/22, you cannot sell a different lot from 2/22 to 4/21 without creating wash sale.
Lastly, any issues with TLH/wash sale when holding VTSAX in Vanguard accounts [Brokerage/Roth] and FZROX at Fidelity [HSA] and auto buying every 15 days?
I personally think fzrox and vtsax are not substantially identical because fzrox holds far fewer companies/stocks than vtsax (~2,600 vs 4,100).. So I believe you'd be fine, but as it has been discussed in this thread earlier, IRS has never bothered to define what substantially identical means, so it's possible our definitions don't align with how IRS thinks about it. I think most folks in this forum will consider VTSAX and FZROX to not be substantially identical.
Thanks Gas_Balloon, that article was helpful.

To answer your first question, I would sell the full lot purchased on 1/3 in my brokerage account (as well as older losses). But am I correct that since I’m not doing anything in my Roth IRA (other than the normal dividend schedule in 2022), that I couldn’t even do that until Feb 6th because of the 1/5 Roth purchase?

Lot of moving pieces with all of this but selling the most recent full lot at a loss (with the no purchases for 31 days before or after in ANY account) is the moral of the story.
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Re: Tax Loss Harvesting

Post by rkhusky »

ForeverInvestorILL wrote: Sat Jan 22, 2022 12:58 pm But am I correct that since I’m not doing anything in my Roth IRA (other than the normal dividend schedule in 2022), that I couldn’t even do that until Feb 6th because of the 1/5 Roth purchase?
Unless you wait until 2/7 to TLH or sell all the VTSAX in your and your wife's Roth IRA's first, you will have a fairly substantial permanently disallowed loss.
Even if you sell all VTSAX in your IRA's, you should also sell the shares in the brokerage account purchased on 1/3 and 1/4.
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Re: Tax Loss Harvesting

Post by oktax »

I have always understood that you could avoid a disallowed loss by selling the lots that would cause a wash sale along with the lots with losses you’re attempting to recognize. After all, if the point of the wash sale rules is to prevent someone from recognizing a loss but maintaining their investment position, it seems reasonable that if you sell the lots that would trigger a wash sale, you’re complying with the rules’ intent.

Are others worrying about not technically complying with the rules when they “wash the wash sale” and recognize these losses?

If it’s at all a concern, is it possible to avoid this issue entirely by only buying lots spaced out 32 days apart? I typically buy monthly, but not auto invest, so it seems like an easy strategy to implement if it’s worth the time and effort.
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fetch5482
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Re: Tax Loss Harvesting

Post by fetch5482 »

oktax wrote: Sat Jan 22, 2022 1:51 pm I have always understood that you could avoid a disallowed loss by selling the lots that would cause a wash sale along with the lots with losses you’re attempting to recognize.
That's correct. The example from few posts ago was buying a separate lot due to dividend investment without selling it.
It's possible that the replacement lots you want to sell you avoid wash may be trading at a profit when attempting to TLH a different lot.
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Re: Tax Loss Harvesting

Post by oktax »

gas_balloon wrote: Sat Jan 22, 2022 1:54 pm
oktax wrote: Sat Jan 22, 2022 1:51 pm I have always understood that you could avoid a disallowed loss by selling the lots that would cause a wash sale along with the lots with losses you’re attempting to recognize.
That's correct. The example from few posts ago was buying a separate lot due to dividend investment without selling it.
It's possible that the replacement lots you want to sell you avoid wash may be trading at a profit when attempting to TLH a different lot.
So if some lots have a gain in them that you need to sell, don’t the gains just net against the losses, and then you’re allowed to recognize the net loss?

Would it just make things a lot easier by intentionally only buying lots 32 days apart?
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fetch5482
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Re: Tax Loss Harvesting

Post by fetch5482 »

oktax wrote: Sat Jan 22, 2022 2:09 pm
gas_balloon wrote: Sat Jan 22, 2022 1:54 pm
oktax wrote: Sat Jan 22, 2022 1:51 pm I have always understood that you could avoid a disallowed loss by selling the lots that would cause a wash sale along with the lots with losses you’re attempting to recognize.
That's correct. The example from few posts ago was buying a separate lot due to dividend investment without selling it.
It's possible that the replacement lots you want to sell you avoid wash may be trading at a profit when attempting to TLH a different lot.
So if some lots have a gain in them that you need to sell, don’t the gains just net against the losses, and then you’re allowed to recognize the net loss?

Would it just make things a lot easier by intentionally only buying lots 32 days apart?
Those gains will usually be short term gains. Depending on what other gains you have in the year, they may or may not get written off against the TLH.
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oktax
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Re: Tax Loss Harvesting

Post by oktax »

gas_balloon wrote: Sat Jan 22, 2022 2:35 pm
oktax wrote: Sat Jan 22, 2022 2:09 pm
gas_balloon wrote: Sat Jan 22, 2022 1:54 pm
oktax wrote: Sat Jan 22, 2022 1:51 pm I have always understood that you could avoid a disallowed loss by selling the lots that would cause a wash sale along with the lots with losses you’re attempting to recognize.
That's correct. The example from few posts ago was buying a separate lot due to dividend investment without selling it.
It's possible that the replacement lots you want to sell you avoid wash may be trading at a profit when attempting to TLH a different lot.
So if some lots have a gain in them that you need to sell, don’t the gains just net against the losses, and then you’re allowed to recognize the net loss?

Would it just make things a lot easier by intentionally only buying lots 32 days apart?
Those gains will usually be short term gains. Depending on what other gains you have in the year, they may or may not get written off against the TLH.
Thanks. My taxable assets are simple and all in VTSAX. So assuming I only recognize gains as part of loss harvesting activities, seems easy to assume that the gains just net against the losses. Though point taken that this may not be exact.

Again, should I just plan to only invest in 32 day increments? If it’s that simple to avoid all of this, why doesn’t everyone just space out their investments that way?
rkhusky
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Re: Tax Loss Harvesting

Post by rkhusky »

oktax wrote: Sat Jan 22, 2022 2:40 pm Again, should I just plan to only invest in 32 day increments? If it’s that simple to avoid all of this, why doesn’t everyone just space out their investments that way?
The wash sale window is 61 days (+- 30 days on either side of the sale for a loss).

Also keep in mind that you can't select particular shares inside an IRA or 401k. They are sold first in first out (FIFO).
oktax
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Re: Tax Loss Harvesting

Post by oktax »

rkhusky wrote: Sat Jan 22, 2022 4:23 pm
oktax wrote: Sat Jan 22, 2022 2:40 pm Again, should I just plan to only invest in 32 day increments? If it’s that simple to avoid all of this, why doesn’t everyone just space out their investments that way?
The wash sale window is 61 days (+- 30 days on either side of the sale for a loss).

Also keep in mind that you can't select particular shares inside an IRA or 401k. They are sold first in first out (FIFO).
Thank you. So assuming I have no substantially identical funds in my 401(k) and IRA, then if I only make investments in my taxable account every 32 days, wouldn’t that make TLH a lot simpler?

Example: I make a purchase on 1-3 that has a loss I want to harvest. If I only made my regular investments 32 days before and 32 days after, I can sell the 1-3 lot without even needing to consider what lots I may to need sell to “wash the wash sale.”

Does that make sense, or is there something I’m forgetting?
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fetch5482
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Re: Tax Loss Harvesting

Post by fetch5482 »

oktax wrote: Sat Jan 22, 2022 4:49 pm Thank you. So assuming I have no substantially identical funds in my 401(k) and IRA, then if I only make investments in my taxable account every 32 days, wouldn’t that make TLH a lot simpler?

Example: I make a purchase on 1-3 that has a loss I want to harvest. If I only made my regular investments 32 days before and 32 days after, I can sell the 1-3 lot without even needing to consider what lots I may to need sell to “wash the wash sale.”

Does that make sense, or is there something I’m forgetting?
The wash sale 30-day rule is based on the time of sale, not purchase.

Let's start with your purchase schedule. Based on what you tell, you made a purchase on 12/2, then 1/3, and next one will be meet on 2/4 (32 days after 1/3), correct?

Now let's assume that the lot you bought on 1/3, say you sell it for loss on 1/24. This means that you cannot repurchase a replacement lot between 12/24 and 2/24 (30 day before and after selling at a loss) without making that sale a wash sale. Agree again?

But if you're purchasing every 32 days, you'll end up purchasing a replacement lot of 2/4 (32 days from 1/3, as stated above). That'll make your 1/24 sale a wash sale.

So any schedule you have based on purchase being spread will not work (even if you leave atleast 62 days between those purchases, as was suggested in this thread by someone else above - don't do it).

This is why I don't do automatic monthly investments or automatic dividend reinvestment. This is why I now prefer ETFs over Mutual fund as well, so I can sell my replacement lots without fearing that the market may turn before end of day.
Instead, I follow livesoft's RBD definition and purchase whenever market has slightly reversed... And if that purchase happens to cause a wash due to a known recent sale I did, I'll simply purchase my other part of the pair (example VV+VXF instead of VTI; or VEU instead of VXUS). Similarly, at the time of selling if I've purchased something recently that'll cause wash, I'll either sell the replacement lot as well (if it's trading at a loss), or just wait few more days hoping that I'll still be able to harvest then. Following my "Costco style" harvesting that I talked about few posts ago means there's a high chance my lot will still be trading at losses few days later once I'm out of the wash window.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
oktax
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Re: Tax Loss Harvesting

Post by oktax »

gas_balloon wrote: Sat Jan 22, 2022 5:01 pm
oktax wrote: Sat Jan 22, 2022 4:49 pm Thank you. So assuming I have no substantially identical funds in my 401(k) and IRA, then if I only make investments in my taxable account every 32 days, wouldn’t that make TLH a lot simpler?

Example: I make a purchase on 1-3 that has a loss I want to harvest. If I only made my regular investments 32 days before and 32 days after, I can sell the 1-3 lot without even needing to consider what lots I may to need sell to “wash the wash sale.”

Does that make sense, or is there something I’m forgetting?
The wash sale 30-day rule is based on the time of sale, not purchase.

Let's start with your purchase schedule. Based on what you tell, you made a purchase on 12/2, then 1/3, and next one will be meet on 2/4 (32 days after 1/3), correct?

Now let's assume that the lot you bought on 1/3, say you sell it for loss on 1/24. This means that you cannot repurchase a replacement lot between 12/24 and 2/24 (30 day before and after selling at a loss) without making that sale a wash sale. Agree again?

But if you're purchasing every 32 days, you'll end up purchasing a replacement lot of 2/4 (32 days from 1/3, as stated above). That'll make your 1/24 sale a wash sale.

So any schedule you have based on purchase being spread will not work (even if you leave atleast 62 days between those purchases, as was suggested in this thread by someone else above - don't do it).

This is why I don't do automatic monthly investments or automatic dividend reinvestment. This is why I now prefer ETFs over Mutual fund as well, so I can sell my replacement lots without fearing that the market may turn before end of day.
Instead, I follow livesoft's RBD definition and purchase whenever market has slightly reversed... And if that purchase happens to cause a wash due to a known recent sale I did, I'll simply purchase my other part of the pair (example VV+VXF instead of VTI; or VEU instead of VXUS). Similarly, at the time of selling if I've purchased something recently that'll cause wash, I'll either sell the replacement lot as well (if it's trading at a loss), or just wait few more days hoping that I'll still be able to harvest then. Following my "Costco style" harvesting that I talked about few posts ago means there's a high chance my lot will still be trading at losses few days later once I'm out of the wash window.
Thanks for this great explanation. I figured I had something wrong and won’t change what I’ve been doing in search of making these TLH opportunities easier.
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fetch5482
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Re: Tax Loss Harvesting

Post by fetch5482 »

oktax wrote: Sat Jan 22, 2022 6:33 pm Thanks for this great explanation. I figured I had something wrong and won’t change what I’ve been doing in search of making these TLH opportunities easier.
Glad it was helpful. Wash sales takes a while for most people to understand, but once you do TLH a couple times it'll become natural for you. I was in the same boat as you few years ago when members like livesoft helped answer several questions like these to make it more clear.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
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