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What happens when TLH losses >$3000?

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  •  Basil 
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    When tax loss harvesting, I get that you can use the losses to off-set any realized gains, and you can also deduct up to $3000 against your taxable income.

     

    From a practical standpoint, what happens when your losses are >$3,000? Will I get a tax form from my broker (eg. Vanguard) every year that I can upload into TurboTax? Is this something I need to keep track of myself? I’ve tried TLH for the first time this year, and am wondering what really happens come tax time next year and even the year after.

     

    Thanks!

    #171992 Reply
    jfoxcpacfp jfoxcpacfp 
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    You will carry the loss into the future and use it up in $3,000 increments annually. Schedule D will report the amount of loss and the carryover and TT will keep track of annual usage.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #171996 Reply
     Basil 
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    Thank you for the super quick response! So it sounds rather automated between getting the tax forms from Vanguard and tracking the losses via TurboTax. That’s exactly what I was hoping!

    #171997 Reply
    jfoxcpacfp jfoxcpacfp 
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    Thank you for the super quick response! So it sounds rather automated between getting the tax forms from Vanguard and tracking the losses via TurboTax. That’s exactly what I was hoping!

    Click to expand…

    That’s correct. No excel spreadsheets  😉 .

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #171999 Reply
    Vagabond MD Vagabond MD 
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    You will carry the loss into the future and use it up in $3,000 increments annually. Schedule D will report the amount of loss and the carryover and TT will keep track of annual usage.

    Click to expand…

    Yup, I am still working off a loss from 2007-8

    "Wealth is the slave of the wise man and the master of the fool.” -Seneca the Younger

    #172015 Reply
    jfoxcpacfp jfoxcpacfp 
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    You will carry the loss into the future and use it up in $3,000 increments annually. Schedule D will report the amount of loss and the carryover and TT will keep track of annual usage.

    Click to expand…

    Yup, I am still working off a loss from 2007-8

    Click to expand…

    Actually, I should have clarified that you will use the loss to offset any capital gains during succeeding years and then deduct an additional $3k.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #172020 Reply
    Liked by q-school, Zaphod
    Vagabond MD Vagabond MD 
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    Splash Refinancing Bonus

    You will carry the loss into the future and use it up in $3,000 increments annually. Schedule D will report the amount of loss and the carryover and TT will keep track of annual usage.

    Click to expand…

    Yup, I am still working off a loss from 2007-8

    Click to expand…

    Actually, I should have clarified that you will use the loss to offset any capital gains during succeeding years and then deduct an additional $3k.

    Click to expand…

    Yup, and I have very little in capital gains as I rarely sell for a profit.

    "Wealth is the slave of the wise man and the master of the fool.” -Seneca the Younger

    #172022 Reply
    Liked by hatton1
    Drop it into MD Drop it into MD 
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    The way everyone talks about these tax losses makes them seem kind of desirable  😛

     

    It really goes to show that you you understand and use the system correctly a brokerage account can be quite tax efficient.

    #172023 Reply
    hatton1 hatton1 
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    Carry forward losses are indeed very valuable.  You TLH then buy something similar.  You get the $3k deduction and can offset any taxable account sale.

    #172031 Reply
     Dr P 
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    Vagabond, would you mind clarifying your last point?
    Thanks

    #172043 Reply
     orthodds 
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    Joined: 11/07/2017

    I’ve done some TLH, but I could be more aggressive with it. Vagabond, sounds like you have done some serious TLH. It sounds awesome to TLH 100s of thousands of dollars and use that to offset future gains. That would make a bear market/correction even more of an opportunity. I’m currently putting lots of money each year into taxable so when the market goes south I have a lot of TLH I could do because there’s a large chunk recently invested.

    So here’s a question: what’s the highest balance any of you have had in TLH dollars carried forward?

    PS:  I realize with TLH you are really just deferring the capital gains tax, but that can be quite valuable in and of itself.  Combining TLH with charitable giving can be even more efficient since the accumulated gains aren’t taxed in the case where the stock is donated, yet you get the full deduction for the value of the donation.

    #172048 Reply
     Dusn 
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    The way everyone talks about these tax losses makes them seem kind of desirable  😛

     

    It really goes to show that you you understand and use the system correctly a brokerage account can be quite tax efficient.

    Click to expand…

    Seriously.  The way people seem to get excited about TLH and “buying at a discount” when the stock market crashes sounds like an illogical, psychological defense mechanism.   It is at best a small silver lining to a negative situation.  TLH will not be fully replacing the money you lost.  And when you buy when the market is down, you have no idea if you’re buying the market at a “discount” or buying it exactly where it should be priced at that time or buying a market that’s still overpriced and will drop further.   You don’t know that the market will go up to a greater extent in the future because it dropped now.  And most of us with a decent amout of savings in the stock market would probably be better off in the market doesn’t crash at all.  A market drop is not a good thing.

    #172051 Reply
    Liked by Zaphod
     Tim 
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    Status: Accountant
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    Joined: 09/18/2018

    Each year, the tax loss carry forward form must be completed, EVEN if you had no transactions.
    Make sure the form is submitted each year until it use zero, Schedule D. No option to defer either.

    #172054 Reply
     G 
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    The way everyone talks about these tax losses makes them seem kind of desirable

    Click to expand…

    Right?  Assuming you are trading pairs for TLH, I’ll certainly take it, but a $3k reduction in my taxable income isn’t going to be a game-changer.  If you are TLH from selling individual losers…well, it would be more fun not to have purchased those at all….

    I’m actually kind of surprised that the TCJA didn’t bump up that 3k number or index it to something.  By the time the next tax code reform comes around in 40 years, 3k might be pocket change.

    #172055 Reply
    jfoxcpacfp jfoxcpacfp 
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    And when you buy when the market is down, you have no idea if you’re buying the market at a “discount” or buying it exactly where it should be priced at that time or buying a market that’s still overpriced and will drop further.   You don’t know that the market will go up to a greater extent in the future because it dropped now.  And most of us with a decent amout of savings in the stock market would probably be better off in the market doesn’t crash at all.  A market drop is not a good thing.

    Click to expand…

    That is why you should invest for the long term only. Any price you can get today will be a discount in 10 years, probably in 5. What is not guaranteed is the timeline not the eventuality. 

    So, when you say a market drop is not a good thing, are you saying that you prefer buying at ever higher prices than purchasing funds when the market is down? i.e., you are happiest when you are paying top dollar and the only thing that makes you happier as an investor is when the market goes up tomorrow so you can buy more at an even higher price? It must drive you crazy to rebalance.

    To me, a long term investor and advisor for our clients’ investments, I am always happy for temporary declines, as should be any investor. It’s only when I am ready to liquidate that I am glad the market has an ever-upward long-term trajectory, because I can plan ahead for that. If I couldn’t plan for that, I can assure you I wouldn’t be investing and recommending all my friends, family, and clients do the same. It would be illogical.

    Just as it is illogical to believe “You don’t know that the market will go up to a greater extent in the future because it dropped now.” Please find me a permanent drop in a well-balanced equity portfolio.

    Now please allow me to present my view of dollar-cost averaging – I agree with you. Just as I believe periodic rebalancing is as close to a free lunch as you’ll get as an investor (quoting Nick Murray), I believe tax-loss harvesting defeats the purpose of long-term investing. It encourages the tax tail to wag the lifetime wealth accumulation dog. And I believe it is just as illogical as what you initially stated about equities, even though it makes all of the TLHers feel really good about making lemonade out of the lemons they bought as short-term speculators. It is putting lipstick on a pig.

    TLH is a very poor substitute for periodic rebalancing and you will not catch me doing that to our clients, who tend to prefer more wealth to less taxes.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #172070 Reply

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