Author Topic: Help me do year end selling losses and gains.  (Read 334 times)

BTDretire

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Help me do year end selling losses and gains.
« on: December 21, 2018, 06:06:15 PM »
 I find I have $28,000 of losses in taxable accounts. VTI, and 2- REITs. (market value $238,000)
I have $117,000 of gains in VTI in another account. (market Value $257,890)
 Is it reasonable to sell my $28,000 of losses and sell $28,000 of VTI gains just to pay 0% tax on the gains?

I think it's a good idea, so, is my logic correct? I have a cost basis of $140,822 and market value of $257,890 for a gain of $117,068. Sooo, 45.4% of the market value is Gain.
That means I have to sell $28,000 / 45.4% = $61,674
My question, Is it correct I have to sell $61,674 of VTI to realize a $28,000 capital gain?
Sorry,
 I've been in a different thought loop for a few months and need refreshing.

« Last Edit: December 21, 2018, 07:58:56 PM by BTDretire »

terran

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Re: Help me do year end selling losses and gains.
« Reply #1 on: December 21, 2018, 08:44:01 PM »
What are your normal tax rates? If you're normally in the 0% capital gains bracket then you're essentially "wasting" those losses as you could harvest the gains without paying tax anyway. I think I remember you're a Florida resident, but if you weren't/aren't then state taxes could change this a little. I would at least try to keep the losses $3000 over the gains since that is the amount that can be used against ordinary income in a year and ordinary income tends to be taxed at a higher rate than capital gains. Ordinary income can come from either earned income or traditional to Roth conversions.

BTDretire

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Re: Help me do year end selling losses and gains.
« Reply #2 on: December 22, 2018, 06:44:07 AM »
What are your normal tax rates?
I expect to stay in the 12% bracket.
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If you're normally in the 0% capital gains bracket then you're essentially "wasting" those losses as you could harvest the gains without paying tax anyway.
Yes, I expect to stay in the 0% cap gains bracket. But, I'm pondering whether I'm really wasting those losses?
What else could I do with them? If I use them as described, I'm at least reseting (increasing) my cost basis tax free. And then maybe I could sell some more up to the bracket limit and stay ot 0%.
 Appreciate more discussion on this! I'm still not sure where I stand.
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I think I remember you're a Florida resident, but if you weren't/aren't then state taxes could change this a little.
Yes, Florida
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I would at least try to keep the losses $3000 over the gains since that is the amount that can be used against ordinary income in a year and ordinary income tends to be taxed at a higher rate than capital gains. Ordinary income can come from either earned income or traditional to Roth conversions.
Ha ha! I still have capital losses from the year 2000 that I'm writing off $3,000 a year.
Ya, would like to do Roth Conversions, but suspect I'll run out of time before I'll figure it out.
But I'll make a go of it.




terran

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Re: Help me do year end selling losses and gains.
« Reply #3 on: December 22, 2018, 07:35:05 AM »
I meant wasting in the sense that you're really just trading gains in one for gains in the other. One day you'll have gains on the things you sold and reinvested at a loss since your cost basis in those. If you already have carry over losses you could sell your gains and use that up too.

If you're on ACA insurance, Mr. Green reminded me in a similar thread that you'll need to account for that in your tax planning too.

As far as the IRA to Roth conversion, if you have both an IRA and a Roth open at the same brokerage you should be able to just initiate a transfer online. I just did it at Fidelity.

EscapeVelocity2020

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Re: Help me do year end selling losses and gains.
« Reply #4 on: December 22, 2018, 08:08:59 AM »
Maybe I'm missing something here, but the decisions to tax loss harvest should be separate from the decisions and amounts of gains that you realize this year.  If you need the money or have lost faith in the investment, then you're stuck with the associated gains - at least you get to keep most of the free money!

Tax loss harvest as much as you can each year, being careful around the wash sale rule.  As you mention with your Y2K losses, you can carry these short and long term losses indefinitely and use them to offset gains or claim a maximum 3k/yr deduction.

Discretionary amounts of gains, if not offset, should be considered around careful tax bracket planning that is probably beyond the scope of some guy on the internet :)

BTDretire

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Re: Help me do year end selling losses and gains.
« Reply #5 on: December 22, 2018, 09:30:32 AM »
Maybe I'm missing something here, but the decisions to tax loss harvest should be separate from the decisions and amounts of gains that you realize this year.  If you need the money or have lost faith in the investment, then you're stuck with the associated gains - at least you get to keep most of the free money!
Additional info, Next year we will be in full retirement living off our nest egg.
  So you say take the losses and carry them forward until I need to sell gains for income, then use the carry forward.
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Tax loss harvest as much as you can each year, being careful around the wash sale rule.  As you mention with your Y2K losses, you can carry these short and long term losses indefinitely and use them to offset gains or claim a maximum 3k/yr deduction.

 Just to clarify, take all the long term losses I have and carry them forward until I can use them to offset in gains I realize for income.
  I do understand what another poster said, that if I sell a loss, I reset my cost to a lower value, thus, it will just build up another gain that I otherwise would not have had. Thoughts on that?
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Discretionary amounts of gains, if not offset, should be considered around careful tax bracket planning that is probably beyond the scope of some guy on the internet :)
Well, taking my gains will be carefully considered trying to stay at the 0% cap gains bracket.

EscapeVelocity2020

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Re: Help me do year end selling losses and gains.
« Reply #6 on: December 22, 2018, 10:20:42 AM »
Being retired is probably the best reason of all to have carryforward losses - it frees you from tax consequences if you have an unexpected expense (or an exciting opportunity) and need to realize excess gains that increase taxes (since you don't have as much cash flow and access to credit on future earnings).

Tax loss harvesting can either mean selling at a loss and using the proceeds, or it can mean transferring to a similar investment (again, steering clear of wash sale rules) and re-setting the cost basis lower.  It's a well known and effective tax reduction strategy, just takes a little effort.  I'm not a tax expert, so I'm not going to try to walk you through this, but there is plenty of info online.  If you are uncomfortable and it's a significant sum, you might want to consult a CPA or at least your brokerage.