With current market volatility, I would like to capture losses with recent investments to offset my dividends/income. Where can I get more information on TLH (within Vanguard), documenting the losses for tax reporting purposes for the year, forms needed for 2026 tax prep to show losses for accountant and moving the losses forward should they exceed the $3,000 yearly limit? Thank you for any information I can get.
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Anonymous
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9 replies
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The Roth Conversion LadderReplies (9)
Anonymous
7 months ago
thank you everyone for the responses… I probably should have given more context. I am married filing jointly, our HHI with the standard deduction exceeds the 12% bracket. We have about ten years till FIRE. We are DCA monthly into our brokerage account (our largest account) and maxing out our retirement accounts. I am trying to see if there is a better way to optimize from a tax perspective from now till FIRE with our brokerage account.
Allen Hansen
327 XP7 months ago
Watch out for the wash sale rules. If you have been reinvesting dividends in what you are planning to sell, a portion of your loss could be disallowed for this tax year. 30 days before AND after the sale is the time period to be concerned about.
Roberto Sánchez
3,299 XP7 months ago
You might want to reconsider that and think about tax gain harvesting instead. If your income isn't too high (probably around $150k married or $75k single), then there is a good possibility that you are landing in the 12% tax bracket. If that is the case, then you are almost certainly best served by harvesting gains rather than (or in addition to) losses.
In essence, the 0% capital gains tax extends to (almost) the top of the 12% bracket. So, if you realize gains now and ask the government to tax you on it, then you are avoiding a 15% capital gains tax rather than a 12% marginal income tax. The nice thing about harvesting gains is that you don't have to concern yourself with the $3k limit (as the limit is actually dependent on how much room you have in the 12% bracket) and you also don't have the possibility of wash sales (especially if you still have money going into the market periodically, including dividend reinvestment) since wash sales only factor in when capturing losses.
brub888
828 XP7 months ago
Two caveats based on personal experience with my younger relative's tax info:
1) tax gain harvesting will first offset tax losses in the current year or carryover losses from a previous year. without the gains you can deduct up to $3K in losses (Federal and most states) from ordinary 12% income and carry over anything extra.
2) state taxes on LTCG can be substantial. my young relative paid zero Federal taxes on LTCG but paid over 8% NYS + NYC cap gains taxes.
GeeFI
99 XP7 months ago
So then is a strategy to harvest gains when income is low enough to benefit from the federal 0% LTCG tax, then rebuy to reset cost basis? Is that what you’re getting at?
Roberto Sánchez
3,299 XP7 months ago
Yes, that's exactly the procedure. Basically, the way to calculate the amount you can harvest at the 0% capital gains rate is to complete the "Qualified Dividends and Capital Gain Tax Worksheet—Line 16" from the 1040 instructions, pg. 38. Then compare the numbers on lines 1 and 6.
In my case, being self-employed, I always wait until December so that I know with 100% certainty my actual income for the year.
One other thing to be aware of is that the sell-and-rebuy sequence can involve the same fund/ETF/stock with no IRS requirement to wait some number of days between transactions. However, if you happen to be in Vanguard Mutual Funds (i.e., not ETFs, so funds with a 5 letter ticker symbol) then Vanguard will restrict you from buying back into a fund for 30 days after selling shares of that fund.
Anonymous
7 months ago
I think you just answered my last question. Wait till closer to the end of the year and figure out how much room we have in our 0% LTCG bracket and then TGH up to that amount to optimize. When you TGH, do you use specID for specific lots? Sorry, for the questions, this will be my first year attempting this a DIYer.
Roberto Sánchez
3,299 XP7 months ago
Personally, I always use SpecID. However, every brokerage should be able to tell you ahead of time the projected proceeds and what percentage or amount of that is basis versus gain/loss regardless of your particular tax optimization method. That said, SpecID gives you the most fine grained control and the most certainty of hitting a precise number.
BostonFI
5,244 XP7 months ago
White Coat Investor is a good resource for walkthroughs like this.
https://www.whitecoatinvestor.com/tax-loss-harvest-vanguard/