Back in 2009 when stocks were on sale, I made my first investments in the markets in a taxable account. At the time I didn't know about index funds or tax-deferred accounts like 401(k). Fast forward to today and I still own all those stocks (11 companies, total value of maybe $40k). Most have significantly increased in value but a few have lost money. Since I prefer simplification, I'd prefer to sell all the individual stocks and convert to index funds, but I have a hunch it may be better to just sell the "losers" and offset some tax. The reason is that 2017 and part of 2018 should be the final year of paid work for me before FIRE.
For 2017 I estimate 1040 line 7 will be about $144k ($180k - $36k from 401(k)s). We live in NYC, which means we are subject to fed, state, and city income taxes. MFJ + 1 child. We are leaving NYC soon.
1) Is selling the "loser" positions the right move to harvest some losses and reduce the tax burden? I estimate $2k of losses. I've read a couple blog posts at GCC, MadFI, but it's still not quite clear where exactly the tax-loss goes on the 1040 return. Is it a negative capital gain?
2) For these stocks, brokerage firms have changed hands several times. First it was DRIPs (at Computershare, etc), then Sharebuilder. Now everything is compiled at Vanguard. Vanguard's website is asking me which cost-basis method I prefer. Doesn't it know the cost basis? Presumably when the shares were transferred their metadata was also transferred. But perhaps not. If it was not, does that mean all of this thinking is pointless and there is no way to reduce my tax?
Thank you.