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Tax lost harvesting in Individual account
Posted on 12/20/22 at 9:09 pm
Posted on 12/20/22 at 9:09 pm
How aggressive are you on this with your individual account? What is the IRS opinion on Wash Sale for switching between s&p 500 etfs? Is the tax harvest normally worth it to lower the cost basis (if it’s a etf you will hold long term)? Obviously this year has few winners and bigger losers. Trying to decide whether to dump a large holding in fxaix solely for the tax harvesting.
This post was edited on 12/20/22 at 10:10 pm
4
Posted on 12/20/22 at 9:17 pm to GeauxTigers777
quote:Went bonkers with TLH this year in mine and my client's accounts, especially Sep and Oct.
How aggressive are you on this with your individual account?
quote:Should be fine.
What is the IRS opinion on Wash Sale for switching between s&p 500 etfs?
quote:Yes. (1) Helps your taxes that year and (2) gives you flexibility should you need to sell something that is at a gain for rebalancing or cash needs.
Is the wash sale normally worth it to lower the cost basis (if it’s a etf you will hold long term)?
I say do it. Dump it for 30 days. Jump right back on day 31.
Side note: you can only take a $3,000 loss each year on your taxes, but the rest is carried over to future years until you use it all.
Posted on 12/20/22 at 9:31 pm to GeauxTigers777
quote:
Is the wash sale normally worth it to lower the cost basis (if it’s a etf you will hold long term)?
Absolutely yes.
Say you have a $10 cost basis. And the choice to tax loss harvest at $5. Next year the stock goes to $15. 2 scenarios:
1. You don’t tax loss harvest. You wouldn’t pick up anything in the current year. Then would pick up a $5 gain next year.
2. You tax loss harvest. You would pick up a $5 loss this year (subject to limitations obviously but you get infinite carryover). Then next year you pick up a $10 gain. Your net is still $5.
So while you do pick up a bigger gain at the end, you net to the same amount. But especially if you plan on holding a long time you want to pick up that loss as early as you can.
Only reason you wouldn’t do it is if you think they raise the rates on capital gains significantly when you plan on picking up the gain.
Also I think you understand this, but technically what you want is not a wash sale. Wash sale losses are disallowed.
This post was edited on 12/20/22 at 9:34 pm
Posted on 12/20/22 at 10:09 pm to Weagle25
Thanks to both replies, and definitely a mistake on the wash sale. I’ll edit.
Posted on 12/20/22 at 11:08 pm to GeauxTigers777
quote:
What is the IRS opinion on Wash Sale for switching between s&p 500 etfs?
Twice I’ve had clients audited on this. Lost both at audit level and we won both on appeal.
If you push hard enough they will agree that substantially identical pretty much only means different share classes.
Example if I sold Berkshire A and bought Berkshire B that would be an issue.
You can convince on appeal that two etfs have slight differences. You can probably also convince an intelligent auditor.
This post was edited on 12/20/22 at 11:09 pm
Posted on 12/20/22 at 11:35 pm to LSUFanHouston
Y'all can correct me, but my understanding is one thing OP will need to do is turn off reinvesting dividends, as that will FUBAR the whole thing.
Posted on 12/21/22 at 5:38 am to Niner
quote:
Side note: you can only take a $3,000 loss each year on your taxes, but the rest is carried over to future years until you use it all.
Bet a lot of folks will be using this one. First year i will have to explain this one to my wife
2022 was a rough year unless you had a bunch of Health care / O&G stocks or Etfs. I was way to invested in growth /midcap to be honest and paid the price.
Posted on 12/21/22 at 7:39 am to LSUFanHouston
quote:
What is the IRS opinion on Wash Sale for switching between s&p 500 etfs?
If you want to play it safe, invest in funds that track different indices. For example, switch your SP 500 fund for a Russell 1000 fund. Both are large cap indices and will perform pretty much the same.
Posted on 12/21/22 at 7:46 am to GeauxTigers777
Loss harvesting is fake baw
The tax man is still gonna stick it where it hurts
Keep holding, zom gonna be 7 by April
The tax man is still gonna stick it where it hurts
Keep holding, zom gonna be 7 by April
Posted on 12/21/22 at 11:01 am to Niner
quote:
What is the IRS opinion on Wash Sale for switching between s&p 500 etfs?
quote:
Should be fine.
really? asking honestly because I don't know. but I can sell VOO to harvest losses and buy SPY the next day?
Posted on 12/21/22 at 2:24 pm to Teddy Ruxpin
quote:
Y'all can correct me, but my understanding is one thing OP will need to do is turn off reinvesting dividends, as that will FUBAR the whole thing.
So wait, does TLH not offset your income from dividends?
Posted on 12/21/22 at 2:31 pm to Niner
quote:Are you sure about that? I’ve seen examples of switching from a S&P500 to say a Total Market Index or maybe even something like a Russell 1000 Index (so still fairly large caps), but S&P500 to another S&P500 seems quite a lot like a “ Substantially Identical Security.”
Should be fine.
Posted on 12/21/22 at 2:40 pm to Stiles
The issue is the dividends reinvesting could trigger the wash sale.
ETA: could be small though.
ETA: could be small though.
This post was edited on 12/21/22 at 4:23 pm
Posted on 12/21/22 at 2:41 pm to buckeye_vol
Total stock market and 500 returns are so similar I don't know why anyone would push it. Just switch between those two types and be done with it.
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