Tax Gain Harvesting Case Study Examples
I’ve had Cody Garrett on the podcast multiple times recently to do deep dives on some advanced FI topics and Episode 517 on Tax Gain Harvesting was one that struck a chord with many of you.
It just feels like winning at life when you actively sell a stock or fund at a gain just knowing that you’re going to pay $0 in tax (or very little on it).
This is part of the magic of the FI journey!
For 2024 the 0% Long Term Capital Gains tax bracket goes all the way up to $94,050 in taxable income, so this is enormously valuable for us all to understand.
Cody was nice enough to put together a 10-minute YouTube video running through the case studies we discussed on the episode, complete with visuals of all the numbers.
You will get a ton of value out of this video!
Financial 'Free Lunch': Rebalancing
Last week I linked to Paula Pant’s Afford Anything Episode 560 with “the father of the 4% rule” Bill Bengen.
If you haven’t listened, please do!
Bill Bengen talks about the four retirement planning “free lunches” that he believes will help aid in your quest for a successful financial retirement.
One of them is “regular portfolio rebalancing.”
This is something I aspire to do, but honestly don’t ever really think about. In fairness it is probably because most of my assets are in VTI/VTSAX, but nevertheless, I think it is important for all of us to understand how to implement this rebalancing.
Cody Garrett to the timely rescue again:
Here’s a free ‘rebalancing calculator spreadsheet’ download and a video walkthrough that Cody uses for his own clients.
What Saves You Time?
Here’s a fun post from our Facebook group from community member Anna where she asked:
“What is something you have or do that saves you a tiny amount of time, but the time adds up? Just 30 seconds saved a day is 3 hours over the course of a year! Here are a few of mine:
- Using paper plates as microwave food covers (not super eco friendly…but with a newborn this gives me an extra 30 seconds to eat a granola bar)
- Cleaning up my room/bathroom as I brush my teeth
- Floss picks!
- Having cleaning products in every bathroom" There were nearly 160 comments with different time saving ideas and I highly suggest taking a look at the post for some inspiration!
ChooseFI Community Taking Action This Week
After following your page and listening to some episodes in your podcast, I decided I wanted to learn more about our finances. My 1% better this week was working on our budget (on my own). I asked my husband to send me ALL the numbers and I got busy with the spreadsheet :) My husband has been the only one who has done the finances in our home and I had always let him handle EVERYTHING to the point where I didn't even know how much my salary was or what was my TSP (401k) balance. I'm so proud of myself for stepping up to learn about our finances.
- Sandy
My fiancé and I have been pet sitting on-and-off for the past 3.5 years, ever since we discovered Trusted Housesitters through the ChooseFI podcast. This year, as part of my year-end financial review, I decided to analyze the impact of our 2024 pet-sitting. The results were surprising: over 80% of our nights this year will be covered by 'free' housing through house sits. The most revealing part was calculating the estimated value of these stays in VHCOL locales by comparing average Airbnb prices in similar areas on the same nights. Conservatively, we're saving around $72,000 in 2024 alone. Beyond this financial win, we've built friendships with wonderful people, made memories with furry friends around the world, and created experiences we'll cherish forever.
- Danny
My 1% better was sitting with my kids over the weekend to count their piggy bank money (they save half of their allowance/gift money) and creating a small Vanguard account for each of them. We've been talking about investing and now they will see for themselves how their money grows!
- Carrie
I did want to share a few wins that I have had recently: It never hurts to ask - I had a medical bill which was incorrectly charged twice to my account. First, I took the time to dispute the charge as part of the bill was initially doubled. After resolving the incorrect billing, I asked about a pay in full discount. With no hesitation, I was offered a 30% discount to pay that day. This lowered my bill from an original $3,300 all the way to $1,400 paid for with my HSA. I next called my internet provider who has slowly but surely raised my price periodically. By having a 15 minute conversation, I was able to bring my internet bill down $25 per month with no change in services or contract obligations. Avoid pointless high fees - I've also initiated a 401k rollover from a prior employer 401k to a newly created IRA to avoid higher expense ratios and annual maintenance costs within my old employer's plan. Spend (or don't earn income) on what you value - My wife and I had our first child in January of 2023. We made the decision for my wife to be a full time mom and leave her corporate job. While this choice has greatly reduced our annual income, the benefits of having 100% of my wife's time with our daughter far outweighs the extra meal out, fancy vacation, new car, or few additional years working on my end to make this happen. Saving and 401k contributions very early in our careers also reinforced our confidence in being able to sacrifice additional savings now to be able to have extra time with our daughter.
- Austin
My 1% better was the phone call I received from a financial planner from my investment company. He called to ask me to 'come in, get to know each other, discuss my retirement goals, and make a comprehensive plan.' Thanks to everything I've learned, I was able to politely say, "Thanks for your call, but I feel great about my retirement planning and my management of it all." The surprise in his voice was awesome. It was such a confidence boost!
- Janelle
My 1% better this week - My wife and I bought a house in 2021 with 10% down and have been paying private mortgage insurance (PMI) of $46 per month since. We were one of the lucky ones and locked in a fixed 2.9% interest rate on the mortgage back then, so we have been paying minimums and putting any extra money to work elsewhere. Out of curiosity, last month I reached out to the bank and asked how to calculate when we would be eligible to stop paying the PMI, and if this would automatically go away once we reached the target balance. They gave me two options and basically said it depends on my Loan to Value (LTV) percentage. First option was the obvious one, pay the loan down to 80% of the value of the original loan, but PMI won't be automatically removed until 78% LTV. This would take about 3 years from where we were at today (~$1600 in PMI later). Option 2 sounded complex but was surprisingly simple - they said I could order a BPO (Broker Price Opinion) for $150. If the BPO assessed value of the home brings the LTV down to 75% or less, they could remove the PMI today. The BPO takes into consideration general market changes and any improvements made to the home. This did not require refinancing and I confirmed the new home value assessment would not be reported to the local municipality for tax purposes. We went with option 2. We filled out a questionnaire the bank sent us and someone came to our home for 15 minutes to take pictures of the home. Because home prices have increased since 2021, and we've made some improvements to the home, our home's LTV % came in at 66%! So we dropped the PMI right away. For $150, we saved around $1400 over the next 3 years. Long story short, if you bought a home a couple years ago and are still paying PMI (private mortgage insurance), ask your bank if you can order a BPO (Broker Price Opinion) and if you're eligible to stop paying PMI based on your newly assessed LTV (Loan to Value) percentage! For us, the BPO cost $150, but we dropped the PMI of $46/month right away due to our home's value going up with the market. We saved over $1400 over the next 3 years.
- Glenn
