Tax Loss Harvesting Support Group

Discussion of the Stock portion of the Permanent Portfolio

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mathjak107
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Re: Tax Loss Harvesting Support Group

Post by mathjak107 » Sun Apr 21, 2019 3:04 pm

Be careful with tax loss harvesting.. it can just kick a bigger tax can down the road to a worse situation...we got burned by it when they raised the capital gains rate to 20% on our sale and added a 3.80% surcharge too....

What you really are doing is resetting the gain pointer on the next purchase to reflect a higher level of gain ...

The best harvesting is tax gain harvesting... that is where you take gains on assets and then pay zero tax because the zero capital gain bracket works for you
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ochotona
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Re: Tax Loss Harvesting Support Group

Post by ochotona » Sun Apr 21, 2019 4:03 pm

Give the appreciated assets to a charity that will accept them!
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Re: Tax Loss Harvesting Support Group

Post by pmward » Mon Apr 22, 2019 9:17 am

My accountant actually recommends his clients take their long term capitol gains whenever they can because the current left wing political landscape is likely to go after the long term capitol gains rate at some point. In his opinion it's better to pay your taxes now at the guaranteed 15% rate than risk being stuck with too much in gains to sell when/if they jack the rates up.
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Re: Tax Loss Harvesting Support Group

Post by drumminj » Mon Apr 22, 2019 9:24 am

pmward wrote:
Mon Apr 22, 2019 9:17 am
In his opinion it's better to pay your taxes now at the guaranteed 15% rate than risk being stuck with too much in gains to sell when/if they jack the rates up.
So sell now, re-buy, and pay the tax?
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Re: Tax Loss Harvesting Support Group

Post by pmward » Mon Apr 22, 2019 9:32 am

drumminj wrote:
Mon Apr 22, 2019 9:24 am
pmward wrote:
Mon Apr 22, 2019 9:17 am
In his opinion it's better to pay your taxes now at the guaranteed 15% rate than risk being stuck with too much in gains to sell when/if they jack the rates up.
So sell now, re-buy, and pay the tax?
Pretty much, yeah. All my taxable holdings are ETF's so it's basically place a sell order, then 10 seconds later placing a buy order (after setting aside ~15% of the gain). Obviously one would always take any losses they can to balance it out, and years where something exceptional is going on it might not make sense to do it (like this year for instance I'm vesting for a very large chunk of company stock that will generate a one time windfall). But on years that I can, I do strategically lock in some long term capitol gains. I tend to agree that the left is looking to redistribute wealth, and the easiest place to do that is on capitol gains. If I do it every year or two it is painful, but not devastating. Imagine what would happen if tomorrow they announced that next year they were bumping to a 25% rate. How painful of a decision would it be for someone to decide whether or not to take long term cap gains now at 15% or wait if someone had years and years worth of gains built up? He is basically trying to avoid his clients being in that position.
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ochotona
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Re: Tax Loss Harvesting Support Group

Post by ochotona » Mon Apr 22, 2019 9:34 am

pmward wrote:
Mon Apr 22, 2019 9:17 am
My accountant actually recommends his clients take their long term capitol gains whenever they can because the current left wing political landscape is likely to go after the long term capitol gains rate at some point. In his opinion it's better to pay your taxes now at the guaranteed 15% rate than risk being stuck with too much in gains to sell when/if they jack the rates up.
Super idea. A way to thwart Madame President AOC.
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Re: Tax Loss Harvesting Support Group

Post by pmward » Mon Apr 22, 2019 9:38 am

ochotona wrote:
Mon Apr 22, 2019 9:34 am
pmward wrote:
Mon Apr 22, 2019 9:17 am
My accountant actually recommends his clients take their long term capitol gains whenever they can because the current left wing political landscape is likely to go after the long term capitol gains rate at some point. In his opinion it's better to pay your taxes now at the guaranteed 15% rate than risk being stuck with too much in gains to sell when/if they jack the rates up.
Super idea. A way to thwart Madame President AOC.
Yeah, and you even see quite regularly on the Bogleheads forum, times when people need/want to sell for some reason, but feel paralyzed by the sheer amount of capitol gains they've generated over the years. By strategically wiping the slate clean and squaring up with the house every so often you kind of avoid that.
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Re: Tax Loss Harvesting Support Group

Post by sophie » Mon Apr 22, 2019 10:06 am

It's an interesting idea. Not only do you avoid cap gains at potentially higher rates in future, but you set yourself up for useful tax loss harvesting by resetting the basis to a high level. If you're in a high tax bracket, that $3000 offset to ordinary income is well worth prepaying some tax. Just be careful about state tax, if that applies.

So how likely do you guys think that there will be future increases in capital gains tax? Not hearing much about it specifically, although of course plenty of railing against "the rich". It is true that taxable stock holdings could be regarded as a reliable marker of rich-ness. Stocks in a 401K don't count, since those gains are taxed at ordinary income rates. However, in order for a politician to act on this they must be aware of it conceptually. That may be giving the most strident anti-rich Dems too much credit.
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Re: Tax Loss Harvesting Support Group

Post by pmward » Mon Apr 22, 2019 10:24 am

sophie wrote:
Mon Apr 22, 2019 10:06 am
It's an interesting idea. Not only do you avoid cap gains at potentially higher rates in future, but you set yourself up for useful tax loss harvesting by resetting the basis to a high level. If you're in a high tax bracket, that $3000 offset to ordinary income is well worth prepaying some tax. Just be careful about state tax, if that applies.

So how likely do you guys think that there will be future increases in capital gains tax? Not hearing much about it specifically, although of course plenty of railing against "the rich". It is true that taxable stock holdings could be regarded as a reliable marker of rich-ness. Stocks in a 401K don't count, since those gains are taxed at ordinary income rates. However, in order for a politician to act on this they must be aware of it conceptually. That may be giving the most strident anti-rich Dems too much credit.
I personally think it's very realistic, and if our government does swap over to a more socialistic leadership, probably inevitable.

What does the left want to do? Tax the rich at a higher rate than the middle class and poor? How do the rich avoid that fate? Because the rich don't have much in the way of an "income" in the traditional sense, most of their "income" is in the form of capitol gains, which are taxed at a lower rate. As you mentioned, the average lower or middle class worker would not be effected at all by an increase in LTCG tax. If they have any investments at all, they are all within 401k's and/or IRA's. So politically, it's something that the left could easily sell to their base and have them rally behind. I would not be surprised at all to see this brought up at some point in my lifetime. Matter of fact, at 37 years old, I would be utterly surprised if by the time I retired LTCG was still as low as it is today. And unless you are going to give the assets away or die with them still under your control, you have to pay the taxes on the gains at some point. At least if you do it as you go along you can strategically realize the gains at times when it is beneficial to do so. As you alluded, you are basically actively managing your cost basis over time.
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drumminj
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Re: Tax Loss Harvesting Support Group

Post by drumminj » Mon Apr 22, 2019 10:31 am

That's definitely an interesting idea, though arguably you have less left/invested after paying the taxes, no? So while you may avoid that 25% tax rate, you likely have less gains in the end?

Not arguing against, just thinking through the strategy. Personally my biases align with avoiding future tax liabilities, as I expect taxes to only go up (esp cap gains, as you point out)
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Re: Tax Loss Harvesting Support Group

Post by Xan » Mon Apr 22, 2019 10:42 am

drumminj wrote:
Mon Apr 22, 2019 10:31 am
That's definitely an interesting idea, though arguably you have less left/invested after paying the taxes, no? So while you may avoid that 25% tax rate, you likely have less gains in the end?

Not arguing against, just thinking through the strategy. Personally my biases align with avoiding future tax liabilities, as I expect taxes to only go up (esp cap gains, as you point out)
All else being equal, there is no difference mathematically between taking a percentage out now as opposed to taking the same percentage out later.

It's similar to a Roth vs Traditional IRA: if the effective tax rate is the same both when you contribute and when you take it out (which it probably won't be, but let's assume) then there is no difference between the two.
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Re: Tax Loss Harvesting Support Group

Post by mathjak107 » Mon Apr 22, 2019 11:26 am

sophie wrote:
Mon Apr 22, 2019 10:06 am
It's an interesting idea. Not only do you avoid cap gains at potentially higher rates in future, but you set yourself up for useful tax loss harvesting by resetting the basis to a high level. If you're in a high tax bracket, that $3000 offset to ordinary income is well worth prepaying some tax. Just be careful about state tax, if that applies.

So how likely do you guys think that there will be future increases in capital gains tax? Not hearing much about it specifically, although of course plenty of railing against "the rich". It is true that taxable stock holdings could be regarded as a reliable marker of rich-ness. Stocks in a 401K don't count, since those gains are taxed at ordinary income rates. However, in order for a politician to act on this they must be aware of it conceptually. That may be giving the most strident anti-rich Dems too much credit.
they already raised it on the higher levels from 15 to 23.80. i delayed a sale one year and got hammered from the increase .. plus your medicare premiums can go up more
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