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Learning, Sharing, and Teaching => Investor Alley => Topic started by: billy b on November 18, 2018, 08:44:56 AM

Title: tax loss harvesting
Post by: billy b on November 18, 2018, 08:44:56 AM
I changed my time horizon from 13 to 3 years, I'm in the 22% tax bracket, have a taxable account with M1 Finance with DLS, VWO, and EWX(VBR and IJS I sold off for profit on Oct. 5th), and would like to sell some of my international index fund DLS, as I'm down $1,956.00.  I started this taxable account beginning this year, and so far all my international ETS's have earned $810.00 in taxable dividends that were used to buy other ETS's in the portfolio.   If I sell $810 of DLS and just get a broad based fund with the money, I'm still losing money overall right, and not breaking even? 
Title: Re: tax loss harvesting
Post by: MustacheAndaHalf on November 18, 2018, 10:32:13 AM
You should read about "long-term capital gains taxes".  You owe less taxes if you sell after 1 year, rather than selling within 1 year of purchase.

When DLS issues a dividend, you pay tax on the dividend.  Besides dividends, international small cap stocks can grow and produce gains once you sell.  The dividend is part of the return, but isn't the only part.

I hope you already made use of 401(k) and IRA accounts (if applicable).
Title: Re: tax loss harvesting
Post by: PDXTabs on November 18, 2018, 11:35:17 AM
As MustacheAndaHalf alluded to, long term capital losses will cancel out long term capital gains, and likewise for short term. However, any remaining losses (not cancelled out by gains) can be written off of your regular income up to $3K per year:
https://ttlc.intuit.com/questions/3321046-i-have-10k-in-capital-loss-i-know-i-have-to-claim-3k-this-year-but-how-can-i-tell-if-it-would-be-beneficial-to-carry-over-any-in-future-years-or-claim-all-of-it-now
Title: Re: tax loss harvesting
Post by: billy b on November 18, 2018, 05:15:03 PM
Okay, so is my $810 in dividends from this year considered short term capital gain?  If I sell $810 of DLS at a loss, do I get $810 off my tax bill or just that amount off my taxable income, which means I would lose money overall?

My wife and I have done Roth/maxed out for all our retirement accounts,  2 each 401(k), 2 each IRA, 1 each 457, since 2016 (after we paid off our house), then I slowly learned about FIRE, and now I learned about the Roth conversion ladder a month a ago and realized I should have done Traditional for all of our retirement accounts based on my new FIRE plans (and that would have reduced our taxes a kajillion dollars), so I just switched all our retirement accounts to Traditional.
Title: Re: tax loss harvesting
Post by: PDXTabs on November 19, 2018, 09:23:06 AM
Okay, so is my $810 in dividends from this year considered short term capital gain?  If I sell $810 of DLS at a loss, do I get $810 off my tax bill or just that amount off my taxable income, which means I would lose money overall?

No, qualified dividends are taxed at long term capital gains rates. But you do not get to cancel out dividend income with capital losses, except to the extent that you can cancel out $3K or ordinary income:
https://www.wellsfargoadvisors.com/planning/goals/tax-center/dividend-income-tax.htm

If I were you I would sell enough DLS that you have a $3K loss (if you have that much). That doesn't mean $3K of DLS, that means a $3K loss from the sale.*

* - or you could just sell it all, anything over $3K can get carried over into future tax years to offset future income.