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Daily Tax Loss Harvesting - worth the fees?

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  • Daily Tax Loss Harvesting - worth the fees?

    I'm a TLH newbie so this may be a dumb question.  If I were to TLH on my own I imagine it would only happen once or twice a year - I don't currently TLH at all.  Would it be worth the fee (.25%) to have a roboadvisor do daily TLH for me?  I'm assuming daily TLH would allow me to deduct 3000/yr (which is the max, right?) while doing it bi-annually would probably not be the max every year.  If my marginal tax rate is 33% what is the break even point for daily TLH with a robo vs not doing any TLH?

    I figured $1000 in tax savings/.0025=400k

  • #2
    It isn't very hard at all to TLH 3k in a year.  I've already TLH'd over 25k this year, which is a year that the market is actually up slightly overall.  If you are at all attuned to what is going on in the markets and you have a decent sized taxable account, it shouldn't be that hard to know when your investments have lost money.

    Also, you may be saving $1000 in taxes now, but you're eventually going to have to pay a higher capital gains tax than you would have otherwise, had you never TLH'd in the first place.  So you don't really save $1000.  I don't know how to tell you the right way to calculate the break-even balance, except that it's more complicated than you think.  The "how it works" section of the bogleheads wiki may be useful:

    https://www.bogleheads.org/wiki/Tax_loss_harvesting
    I sometimes have trouble reading private messages on the forum. I can also be contacted at [email protected]

    Comment


    • #3




      It isn’t very hard at all to TLH 3k in a year.  I’ve already TLH’d over 25k this year, which is a year that the market is actually up slightly overall.  If you are at all attuned to what is going on in the markets and you have a decent sized taxable account, it shouldn’t be that hard to know when your investments have lost money.

      Also, you may be saving $1000 in taxes now, but you’re eventually going to have to pay a higher capital gains tax than you would have otherwise, had you never TLH’d in the first place.  So you don’t really save $1000.  I don’t know how to tell you the right way to calculate the break-even balance, except that it’s more complicated than you think.  The “how it works” section of the bogleheads wiki may be useful:

      https://www.bogleheads.org/wiki/Tax_loss_harvesting
      Click to expand...


      As long as those capital gains taxes are lower than your current marginal/effective rate than you're still doing well. Also its more money allowed to grow, good problem.

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      • #4




        Also, you may be saving $1000 in taxes now, but you’re eventually going to have to pay a higher capital gains tax than you would have otherwise, had you never TLH’d in the first place.  So you don’t really save $1000.  I don’t know how to tell you the right way to calculate the break-even balance, except that it’s more complicated than you think.  The “how it works” section of the bogleheads wiki may be useful:

        https://www.bogleheads.org/wiki/Tax_loss_harvesting
        Click to expand...


        I'm deferring paying at a 33% rate now and will eventually pay at a cap gains rate in the hopefully distant future of 15-20%, right?

        Comment


        • #5







          Also, you may be saving $1000 in taxes now, but you’re eventually going to have to pay a higher capital gains tax than you would have otherwise, had you never TLH’d in the first place.  So you don’t really save $1000.  I don’t know how to tell you the right way to calculate the break-even balance, except that it’s more complicated than you think.  The “how it works” section of the bogleheads wiki may be useful:

          https://www.bogleheads.org/wiki/Tax_loss_harvesting
          Click to expand…


          I’m deferring paying at a 33% rate now and will eventually pay at a cap gains rate in the hopefully distant future of 15-20%, right?
          Click to expand...


          Yep.  Your heirs would get the best deal of all, since any assets you pass on get stepped up in basis when they're transferred.
          I sometimes have trouble reading private messages on the forum. I can also be contacted at [email protected]

          Comment


          • #6







            Also, you may be saving $1000 in taxes now, but you’re eventually going to have to pay a higher capital gains tax than you would have otherwise, had you never TLH’d in the first place.  So you don’t really save $1000.  I don’t know how to tell you the right way to calculate the break-even balance, except that it’s more complicated than you think.  The “how it works” section of the bogleheads wiki may be useful:

            https://www.bogleheads.org/wiki/Tax_loss_harvesting
            Click to expand…


            I’m deferring paying at a 33% rate now and will eventually pay at a cap gains rate in the hopefully distant future of 15-20%, right?
            Click to expand...


            You could pay a 0% capital gains tax in retirement, especially if a decent share of your portfolio is in taxable or Roth accounts.

            Comment

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