Author Topic: Help with taxable account- tax loss harvesting  (Read 1218 times)

JSMustachian

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Help with taxable account- tax loss harvesting
« on: January 05, 2018, 06:30:37 PM »
I've been thinking of exchanging one of my funds in my taxable account to a different fund. Currently I've lost $91 which is nothing major but if I am going to change funds anyways..should I sell the fund to do tax loss harvesting or is it better I just hold the fund and see if it turns around.

I am new to tax harvesting so I am not sure what the best course of action is.
« Last Edit: January 05, 2018, 08:18:43 PM by JSMustachian »

MustacheAndaHalf

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Re: Help with taxable account- tax loss harvesting
« Reply #1 on: January 05, 2018, 09:28:44 PM »
At the end of the year, did some additional cash appear in that account?  Normally funds distribute dividends in December (among other times), so if you didn't see any cash appear, you're probably "reinvesting dividends".  But to the IRS, that's another word for buying more of the fund.

If, within 30 days of buying the fund, you then sell, you have a "wash sale" and can't deduct the loss.  (A gain is fine - the IRS is okay with you paying them!)

So you might want to wait 30 days and then sell the fund to avoid the wash sale preventing the loss from being considered real by the IRS.

In general funds don't know you own them.  They don't know you bought at $100/share and now at $95/share you're waiting for it to recover.  The stock market goes up over the long-term, so you could wait.  But that other fund is also growing, so you could switch funds and wait for the new fund to grow as well.

Overall, check for dividends and avoid selling at a loss within 30 days of reinvesting dividends.

JSMustachian

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Re: Help with taxable account- tax loss harvesting
« Reply #2 on: January 06, 2018, 10:04:48 AM »
At the end of the year, did some additional cash appear in that account?  Normally funds distribute dividends in December (among other times), so if you didn't see any cash appear, you're probably "reinvesting dividends".  But to the IRS, that's another word for buying more of the fund.

If, within 30 days of buying the fund, you then sell, you have a "wash sale" and can't deduct the loss.  (A gain is fine - the IRS is okay with you paying them!)

So you might want to wait 30 days and then sell the fund to avoid the wash sale preventing the loss from being considered real by the IRS.

In general funds don't know you own them.  They don't know you bought at $100/share and now at $95/share you're waiting for it to recover.  The stock market goes up over the long-term, so you could wait.  But that other fund is also growing, so you could switch funds and wait for the new fund to grow as well.

Overall, check for dividends and avoid selling at a loss within 30 days of reinvesting dividends.

My dividends are reinvested so I will wait the 30 days from that date and switch the funds. Thanks!