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Take Advantage of the Market Dip & Reduce Your Tax Bill...



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 4 months ago '04        #1
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x Tha Arkitek x  topics gone triple plat - Number 1 spot x3
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Take Advantage of the Market Dip & Reduce Your Tax Bill...
 

 
...visit this link Tax-Loss Harvesting (read this after reading my post).

For those investing in the market in taxable brokerage accounts, most of you know it's probably a good time to buy at a discount. But on the flip side, it's also a good time to sell off and re-allocate some of those 'in the red' purchase lots to pay fewer taxes.

Couple of important rules, 1) You CAN'T do this with any stocks/funds you've purchased within the past 30 days (initial or added investment), and 2) You can't buy back into this stock/fund for 30 more days AFTER you sold it off. If you break either of these rules, you'll generate a wash sale and you can't write off the loss on your taxes. Just make a note and set a 30-day reminder so you don't slip up.

The creative part here, is that when you sell off...don't just let the money sit in cash or wait to put it back into the same security. Just buy back into something else so that your money is still working....

In the case of mutual funds/ETF's, you simply buy back into a similar but NOT identical fund. For example, if I decided to take sell off a portion of a 'US Total Stock Market' index fund, I could instantly put the money from that sell into a "S&P 500" index fund to avoid the wash sale and keep my money invested. Those funds have a lot of overlap, so it's kind of gaming the system to an extent. To be clear, you CANNOT sell off VOO (S&P 500) and buy into IVV (S&P 500), although the 2 are different tickers, they're both funds that track the S&P 500....this would generate a wash sale, voiding the tax benefit.

My portfolio is down big over the past month (nearly $50K as of today, but that includes 401K/Roth IRA/TSP), but I'm just going to make the best of it and tax-loss harvest to reduce my tax bill. I'm planning to sell off some ITOT (US Total Market (still on the fence about doing a little MSFT) and use those funds to buy more IVV (S&P500), FTEC (NASDAQ) or SPYG (technically S&P 500 Growth, but heavy on MSFT/AAPL --- nearly 25% between the two).

Last thing, your brokerage account should let you choose the exact lot of shares by date that you want to sell when you do. So you only want to sell off the ones that are actually down. Don't touch it if it's still in the green.
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 4 months ago '19        #2
nola9 
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Thx boss great info. I'm not selling because it's all 401k. But now I know for next tax season. Salute!!
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