Should I use automatic tax loss harvesting?

[Larry Ragman]

I would not. It is a lot of churn and fees for little return. You can get the majority of benefit by waiting until there is a relatively large market downturn and then executing a TLH trade.

[billy]

How do you guys avoid this when doing TLH manually, if you have automatic monthly investment setup in your 401k etc? Just go cancel the automatic purchase in all your accounts when you decide to harvest? It includes your spouse's as well, right?

Either 1- hold different asset classes in 401k, roth etc
2- turn off automatic reinvestment of dividends in those accounts

For ex: I hold some international, SP500, small value, reits, and bonds (the horror) in my/my wife's tax deferred accounts. In taxable we hold total stock market that I'll tlh into large cap and if needed into sp500 (but not out of the sp500), and I also hold international funds. So for international I either choose funds that follow different indexes, or turn off auto dividends. I honestly do both just in case I'd forget if I get to a third TLH partner like I did in march 2020.

Also, a partial wash sale is not the end of the world. You just don't get as much benefit as you could've. And really it isnt as hard as it sounds to avoid.

[CFEonline]

The wash-sale rule applies to holdings across multiple accounts. If you have taxable with a different brokerage, you will have potential problems.[/LIST]

How do you guys avoid this when doing TLH manually, if you have automatic monthly investment setup in your 401k etc? Just go cancel the automatic purchase in all your accounts when you decide to harvest? It includes your spouse's as well, right?

[CFEonline]

One guy had 24 pages of TLH transactions to manually input for his $3k deduction and like a $1k carryforward.[/LIST]

Where are you manually inputting this? I had assumed there would be some 10XX form from your brokerage that would just say how much loss you had total...

How is the carryover tracked/verified? (By your brokerage/IRS/etc...)

[Peds]

Wash sales unless all accounts.
17K page 1099s.
Fee.

[Tim]

Several issues to consider in advance:

1. The wash-sale rule applies to holdings across multiple accounts. If you have taxable with a different brokerage, you will have potential problems. Disallowed TLH sales.
2. The size of the purchases matters. One guy had 24 pages of TLH transactions to manually input for his $3k deduction and like a $1k carryforward.
3. TLH partners you need to be comfortable owning. You can run into mulitiple TLH opportunities in a downturn and be 2 or 3 steps removed from the desired investment. Market turns up and you are stuck. This can lead to a "cluster" of holding and a messy portfolio.
4. This is NOT a monthly task. You don't have market corrections monthly. Sometimes it makes sense to actually harvest the big ones and let the little fish get away.

[CordMcNally]

I thought I had read where they caused a lot of wash sales. It was a while ago some maybe I'm completely misremembering.

[CFEonline]

I was looking at using one of the robo advisors for taxable account just to keep it more automated so I don't have to think about it month to month. Is there a downside other than the management fee?