Hey y’all! I have been thinking that this community could use a weekly discussion thread. Feel free to comment below with anything and everything money related that is better suited to a conversation or a quick question and answer than a full post. Some ideas include:
- Journaling about an ongoing job search
- Asking for ideas about how to manage an emergency fund
- Logging recent stock trades
- Talking about the impact of inflation on your budget
- Your plans for maximizing the rewards on a credit card
Again, those are just suggestions, if there’s really anything you’d like to talk about related to finance in your life, feel free to put it here.
TLH in a nutshell is just that you sell a stock for less than you bought it for, then turn around and buy a near-identical stock to keep your position in the market. So for example If I buy VTSAX for $100, and 5 months later it’s worth $80, I will sell VTSAX for $80 and use that to buy $80 worth of VFIAX. VTSAX is total american market index, VFIAX is S&P 500 - they’re effectively the same thing, but they’re different enough that they don’t count for a wash sale. What this ultimately does is allow me to claim -$20 on my income that year and pay less taxes, while losing no actual equity in the market.
When selling/buying stocks for TLH you ideally pay attention to qualified dividends, meaning that you need to own a stock 60 days before its dividend date to get qualified dividends. Most vanguard funds pay out dividends every 3 months, so there’s a ~30 day window where you can shuffle stocks around and still acquire qualified dividends status before the next dividends hit.
There’s a handful of gotchas you need to be aware of when doing TLH, mainly revolving around wash sales, so I would recommend you read a real guide if you’re gonna try it: https://www.whitecoatinvestor.com/tax-loss-harvesting/
It’s a small optimization, mainly worth doing all at once when there’s a big market downturn. If I can claim like 10-20k worth of losses at once I’ll do it. I’m not going to TLH over $300. I personally have a calendar reminder every 3 months to check the market and determine if I should TLH. My reminder is coming up this week, but the market is doing well so nothing I’ve bought has lost any value.
I’ve got two freedom cards already unfortunately (old freedom, freedom flex). I don’t really do the points cards because I don’t travel much. I’m under 5/24 by a ways at this point so I don’t think Chase would be too mad if they had any other cards that I cared about. But otherwise I’ve got like 14 credit cards and I’ve done all the good ones at this point. Cancelling and reapplying might the best option at some point, but like I said I find it hard to care about that level of effort for $100 sometimes.
Yeah true. This general thread is a good idea, since everyone’s at a different point in their financial journey, and interaction on dedicated posts might be low.
My understanding of TLH is that it just delays taxes. You’ll have to pay them eventually, but possibly at a lower rate. It seems like a lot of work for a so-so potential benefit. If I had enough money for it to be worth the effort, I’d probably have enough money to pay some one (or a robot) to do it for me.
Generally, yes. It’s been a while since I’ve thought about it so the exact mechanics elude me, but I think you will be paying it later at a lower tax rate (e.g. your tax rate during retirement) only for each yearly 3k you deduct from your income. Your long-term/short-term losses from TLH still exist in a bucket waiting to be converted to 3k every year, and if you end up realizing stock gains at any point in your life, your remaining bucket losses will cancel them out before you realize those gains. For gains cancelled this way I think it’s a direct push, e.g. no tax difference?
Either way, it’s a small optimization, and totally worth skipping if you don’t care. Because you can only claim up to 3k per year (rolling), it’s just so easy to TLH 10-20k during a market downturn and coast off the 3k/year for a while. It’s something bogleheads do because there’s nothing else to do. It’s effort that you can turn into guaranteed money, which is rare when it comes to the stock market.