#1
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harvesting losses for tax purposes
So I have a substantial tax deferred SEP IRA and a regular personal account. I know I can sell stocks that I are down from my personal account into my SEP. This creates losses in my taxable account which will either offset regular income (Yay) or offset future gains. Is there any reason why this is not a great thing? I have a scottrade account and incur $14 for each trade where I harvest a loss. Is there a minimum loss that is worth the trade? I couldn't off the top of my head figure out the EV of harvesting losses.
Long term one thing I see is my SEP will grow faster than my personal account. I don't see this as a big deal at this point though eventually it may be an issue. Any other thoughts? This post is really just trying to generate discussion and hopefully flesh out my understanding of what I am doing. Krishan |
#2
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Re: harvesting losses for tax purposes
According to this, you can not take the loss (it is a wash sale) if you buy back the stock in your IRA.
-Tom |
#3
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Re: harvesting losses for tax purposes
If you believe that the company is a long-term hold, why not just wait 31 days after selling the taxable account holdings and buy it in your SEP to avoid wash sale problems? Is the stock so volatile that you are concerned there will be a run-up in the next month?
The minimum loss that would be worth the trade depends on your marginal tax bracket. Assuming 35% bracket, a $40 loss breaks you even. My guess is you are talking about losses with a couple more zeroes attached, making transaction costs a non-issue. I believe that you can only take net losses up to $3,000 in your taxable income in a given year. Take this into account if you don't have gains to offset the losses. |
#4
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Re: harvesting losses for tax purposes
Yeah, my understanding is that it's still a wash sale if you sell from taxable and immediately buy the exact same stock for your IRA. But, my understanding is that you can often get away with this easily by buying a similar fund in the case of an index fund. E.g. sell VWO & buy EEM. That is supposedly not a wash sale but a lot of this crap is pretty murky (kinda like, Is online poker legal?).
I've also seen lots of people note that there's no way in hell the IRS would know that you made offsetting transactions between your IRA & taxable accounts. And as noted already, 31 days is not that long. One thing I've done in the past, however, is that instead of selling and waiting 31 days, I buy, wait 31 days, and then sell. Then, you don't worry about missing the rebound if you felt the stock was an even better buy after falling. |
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