This is the best video I watched on tax loss harvesting after spending few hours going through many other videos. For example this video does walk through how the carry over happens over the years while all other videos just glossed over saying "any thing over $3000 is carried over" but never answered if the amount is carried over just 1 more year or as long as the carry over exists. Thank you folks!! Well done.
You need to be careful not to accidentally take a long term cap loss if you have any cap gains in zero tax bracket or take a cap gain if you want to take the $3k loss against ordinary income.
Great video on the tax side, excellent examples, not many people on youtube discuss that. Would have liked more detail on the process for aimilar but not identical rules, but of course if you did that you would be giving away your secret sauce lol.
Thanks for watching and for the comment! There's no secret sauce when it comes to similar investments. Finding a fund that follows a different benchmark is the general guidance. It doesn't help that the IRS is very vague with any specifics of what counts. So do what you are comfortable with.
Lets say you took a $1000 loss a and reinvest much a smaller amount would into that stock be consider a wash sale? Or you can still declare that difference on the loss?
Hello, thanks for watching and for the comment. If you reinvested into the same stock you sold within +/- 30 days it would be considered a wash sale. If your reinvestment is a much smaller amount than what you sold, part of that loss you captured will be adjusted proportionately based on the size of your reinvestment. But the entire loss and deduction may not be taken away. Your custodian will likely inform you of a "wash sale adjustments" to your cost basis. Does that help? Thanks again!
This is very helpful, thank you very much! I had a question about 8:34 , following that example if the max. Tax deduction per year is $3000, then because your losses are $20,000 . Then applying a $3000 tax deduction on your $10000 gains, would mean that only $7000 of your gains will be taxed?
Hello, thank you for watching and for the comment! If you have losses in excess of your gains, none of the gains would be taxable. The $3,000 applies only to excess losses. To clarify that example, $3,000 is the max "excess" deduction you can take. In any year you can claim a deduction for losses that is equal to your gains, plus $3,000. In that example at 8:34, the investor had $10,000 in gains and $20,000 in losses. They can use the losses to offset all the gains, so $0 in taxable gains for them. This would leave them with $10,000 in excess losses still. But, they can not take a deduction for that full $10,000 of remaining losses. Of that $10,000 excess, only $3,000 can provide a further deduction for the current year. The remainder will be carried forward to future years, where they will continue to use up to $3,000 per year until their $10,000 excess is exhausted. Hope that helps, but if it is still unclear please let us know! Thanks again for watching.
Correct. But you can use losses to offset other gains as well. So if you sold one stock for a $15,000 gain, and another for a $10,000 loss. The losses and gains can net out and leave you reporting only $5,000 in capital gains. Also, $3,000 is the most "excess" losses you can capture in a single year. If you capture more than $3,000 in net losses, the left over will be carried over to a future year. So, they can still be used and provide tax deduction in future years. Thanks for watching and thank you for the comment!
Hello! Great video. I am going to make 60,000 this year. No gains on stocks/bonds. Am down 3,000 in individual stocks/mutual funds currently. Does it make sense to sell to bring my AGI to 57,000? Is that how that works?
Hello! Thanks for watching and for the question. You are correct that $3,000 in losses would reduce your AGI by $3,000. It likely makes sense to get that $3,000 deduction from your income. In general it makes sense because the $3,000 is deducted from income, which is a higher tax rate than capital gains. The one thing to consider is that by performing tax loss harvesting, you will now have more gains in the future when you go to sell this investment. So, if it is obvious your future capital gains tax rate will increase, it may not be worth performing tax loss harvesting. Just make sure you are not setting yourself up for higher taxes later when it could have a bigger impact. Thanks again for watching!
@@ArnoldMoteWealthManagement Thanks for the awesome feedback! Great point about the income bracket, definitely worth the thought. I think I have realized that I was being impulsive during the bull market and ended up making an uninformed and not smart investment. Would it be smart to sell that investment for a loss and purchase another asset with it? Rather than purchasing the same stock 31 days later. I appreciated your response!
@@ryanjamison32 Yes, generally it makes sense to reinvest into a new investment to keep market exposure rather than remaining in cash. If you now know it is not a good investment - This is a good chance to diversify into something better.
so lets say i had net losses of 100k in 2020. I deduct 3k on income for 2020. 2021 I had investment gains of 100k. the other 97k in losses carries forward to offset those capital gains? or if I don't have any capital gains to offset then i can deduct another 3k from income? I guess I'm clarifying that the full remaiing amount of capital losses can offset capital gains until they're used up in future years. I had a bad 2018 and never carried them forward. might have saved me 5 figures
Hi Harris, thanks for watching and for the question. The other $97k can only be used $3k each year. You are not able to offset a large portion of 2021's gains (or any future year) unfortunately. You will have a $3,000 deduction each year for many years.
So I've been investing in the stocks. I'm wondering if it would be worth it to cash out on my unrealized capital losses. Earlier this year I had cashed out a realized gain of about 13,000 Then I messed up investing blah blah blah So as of now on paper I've lost about 9 grand. Now I haven't realized those loses yet but I'm wondering if it would be worth it to and profite off my loses. Ik you can get a max of up to 3 grand a year for loses. So if I would I get 3 grand back this year plus another 3 next year. I'm not sure with the Market right now if I'd be better off just selling everything getting profit from my loses and start from scratch. So my total realized gain was 13 thousand and if I cashed out my net loses would be around 9grand. My income with year from work is about 32,000. So not sure if that would play into affect as well
Hi Casey joo, a few things come to mind: First, are you married or single? With taxable income of under $40k (if single) and $80k (if married) you may have some room for some amount of gains to be taxed at 0%. It would be worth understanding how the 0% long term capital gain tax bracket works. Second, if your $13,000 in gains would be taxable, it seems wise to offset that with some losses. You could take the whole $9k in losses this year to offset the $13k in gains, leaving you with a net $4k in gains. The $3k limit for losses is just if your losses are in excess of your gains. With the gains you already have, you could put all $9k to use this year. Hope that helps, but let me know if not. Thanks for watching and for the comment!
@@lynju_ If I understood correctly, Casey had $13k in gains. If she took the $9k in losses that would leave $4k in gains that would be taxed at long term capital gains rate. Losses will offset gains, and you can get a deduction for a max of $3k in net losses (in other words, if you had $3k more in losses than gains). Does that help?
Concerning the 30 days before in the wash sale rule..... If I sell all my shares of a particular stock on say March 1st(even including the ones I bought on February10th)..... does that Feb 10th purchase affect tax loss harvesting? Or only does the Feb 10th purchase affect the tax loss harvesting if they remain in my account?
Hi Bill, thanks for watching and for the question. Yes that February 10th purchase will have some impact. There are a few examples in IRS Publication 550, here's one that I think is most similar to your question and will hopefully help answer your question: "Example: Purchased Within 30 Days Before Sale - You bought 100 shares of M stock on September 26, 2014, for $5,000. On December 19, 2014, you bought 50 shares of substantially identical stock for $2,750. On December 26, 2014, you bought 25 shares of substantially identical stock for $1,125. On January 9, 2015, you sold for $4,000 the 100 shares you bought in September. You have a $1,000 loss on the sale. However, because you bought 75 shares of substantially identical stock within 30 days before the sale, you cannot deduct the loss ($750) on 75 shares. You can deduct the loss ($250) on the other 25 shares. The basis of the 50 shares bought on December 19, 2014, is increased by two-thirds (50 ÷ 75) of the $750 disallowed loss. The new basis of those shares is $3,250 ($2,750 + $500). The basis of the 25 shares bought on December 26, 2014, is increased by the rest of the loss to $1,375 ($1,125 + $250)"
This is the best video I watched on tax loss harvesting after spending few hours going through many other videos. For example this video does walk through how the carry over happens over the years while all other videos just glossed over saying "any thing over $3000 is carried over" but never answered if the amount is carried over just 1 more year or as long as the carry over exists.
Thank you folks!! Well done.
Thank you so much for watching and for your comments. We are glad you found the video useful!
I've watched at least 5 videos on tax loss harvesting. This one is the best. Thank you!
Hi Marcus, Thanks for watching and thank you for the feedback. We are glad you found it helpful!
the visual explanation of TLH is a tax deferral, not a tax elimination is the best. thanks!
Thanks Steven O. We are glad you found it helpful.
You need to be careful not to accidentally take a long term cap loss if you have any cap gains in zero tax bracket or take a cap gain if you want to take the $3k loss against ordinary income.
Thanks for watching and for the comment. You are right, there is a lot to consider with tax loss harvesting!
Great video on the tax side, excellent examples, not many people on youtube discuss that. Would have liked more detail on the process for aimilar but not identical rules, but of course if you did that you would be giving away your secret sauce lol.
Thanks for watching and for the comment! There's no secret sauce when it comes to similar investments. Finding a fund that follows a different benchmark is the general guidance.
It doesn't help that the IRS is very vague with any specifics of what counts. So do what you are comfortable with.
Lets say you took a $1000 loss a and reinvest much a smaller amount would into that stock be consider a wash sale? Or you can still declare that difference on the loss?
Hello, thanks for watching and for the comment.
If you reinvested into the same stock you sold within +/- 30 days it would be considered a wash sale.
If your reinvestment is a much smaller amount than what you sold, part of that loss you captured will be adjusted proportionately based on the size of your reinvestment. But the entire loss and deduction may not be taken away. Your custodian will likely inform you of a "wash sale adjustments" to your cost basis.
Does that help? Thanks again!
Thank you so much!
Great information, thanks!
Thank you for watching and for the feedback, H W!
This is very helpful, thank you very much! I had a question about 8:34 , following that example if the max. Tax deduction per year is $3000, then because your losses are $20,000 . Then applying a $3000 tax deduction on your $10000 gains, would mean that only $7000 of your gains will be taxed?
Hello, thank you for watching and for the comment!
If you have losses in excess of your gains, none of the gains would be taxable. The $3,000 applies only to excess losses.
To clarify that example, $3,000 is the max "excess" deduction you can take. In any year you can claim a deduction for losses that is equal to your gains, plus $3,000.
In that example at 8:34, the investor had $10,000 in gains and $20,000 in losses. They can use the losses to offset all the gains, so $0 in taxable gains for them. This would leave them with $10,000 in excess losses still. But, they can not take a deduction for that full $10,000 of remaining losses. Of that $10,000 excess, only $3,000 can provide a further deduction for the current year. The remainder will be carried forward to future years, where they will continue to use up to $3,000 per year until their $10,000 excess is exhausted.
Hope that helps, but if it is still unclear please let us know! Thanks again for watching.
@@ArnoldMoteWealthManagement That actually helps a lot, thank you very much for clarifying the confussion.
So you can only write off 3000 loss thou right?
Correct. But you can use losses to offset other gains as well. So if you sold one stock for a $15,000 gain, and another for a $10,000 loss. The losses and gains can net out and leave you reporting only $5,000 in capital gains.
Also, $3,000 is the most "excess" losses you can capture in a single year. If you capture more than $3,000 in net losses, the left over will be carried over to a future year. So, they can still be used and provide tax deduction in future years.
Thanks for watching and thank you for the comment!
Hello! Great video. I am going to make 60,000 this year. No gains on stocks/bonds. Am down 3,000 in individual stocks/mutual funds currently. Does it make sense to sell to bring my AGI to 57,000? Is that how that works?
Hello! Thanks for watching and for the question. You are correct that $3,000 in losses would reduce your AGI by $3,000.
It likely makes sense to get that $3,000 deduction from your income. In general it makes sense because the $3,000 is deducted from income, which is a higher tax rate than capital gains.
The one thing to consider is that by performing tax loss harvesting, you will now have more gains in the future when you go to sell this investment. So, if it is obvious your future capital gains tax rate will increase, it may not be worth performing tax loss harvesting. Just make sure you are not setting yourself up for higher taxes later when it could have a bigger impact.
Thanks again for watching!
@@ArnoldMoteWealthManagement Thanks for the awesome feedback!
Great point about the income bracket, definitely worth the thought.
I think I have realized that I was being impulsive during the bull market and ended up making an uninformed and not smart investment. Would it be smart to sell that investment for a loss and purchase another asset with it? Rather than purchasing the same stock 31 days later. I appreciated your response!
@@ryanjamison32 Yes, generally it makes sense to reinvest into a new investment to keep market exposure rather than remaining in cash.
If you now know it is not a good investment - This is a good chance to diversify into something better.
so lets say i had net losses of 100k in 2020. I deduct 3k on income for 2020. 2021 I had investment gains of 100k. the other 97k in losses carries forward to offset those capital gains? or if I don't have any capital gains to offset then i can deduct another 3k from income?
I guess I'm clarifying that the full remaiing amount of capital losses can offset capital gains until they're used up in future years. I had a bad 2018 and never carried them forward. might have saved me 5 figures
Hi Harris, thanks for watching and for the question. The other $97k can only be used $3k each year. You are not able to offset a large portion of 2021's gains (or any future year) unfortunately.
You will have a $3,000 deduction each year for many years.
So I've been investing in the stocks. I'm wondering if it would be worth it to cash out on my unrealized capital losses.
Earlier this year I had cashed out a realized gain of about 13,000
Then I messed up investing blah blah blah
So as of now on paper I've lost about 9 grand.
Now I haven't realized those loses yet but I'm wondering if it would be worth it to and profite off my loses.
Ik you can get a max of up to 3 grand a year for loses.
So if I would I get 3 grand back this year plus another 3 next year.
I'm not sure with the Market right now if I'd be better off just selling everything getting profit from my loses and start from scratch.
So my total realized gain was 13 thousand and if I cashed out my net loses would be around 9grand.
My income with year from work is about 32,000. So not sure if that would play into affect as well
Hi Casey joo, a few things come to mind:
First, are you married or single? With taxable income of under $40k (if single) and $80k (if married) you may have some room for some amount of gains to be taxed at 0%.
It would be worth understanding how the 0% long term capital gain tax bracket works.
Second, if your $13,000 in gains would be taxable, it seems wise to offset that with some losses. You could take the whole $9k in losses this year to offset the $13k in gains, leaving you with a net $4k in gains.
The $3k limit for losses is just if your losses are in excess of your gains. With the gains you already have, you could put all $9k to use this year.
Hope that helps, but let me know if not. Thanks for watching and for the comment!
@@ArnoldMoteWealthManagement I thought you can’t offset like the 4K net .only if she lost more than she gained
@@lynju_ If I understood correctly, Casey had $13k in gains. If she took the $9k in losses that would leave $4k in gains that would be taxed at long term capital gains rate. Losses will offset gains, and you can get a deduction for a max of $3k in net losses (in other words, if you had $3k more in losses than gains). Does that help?
@@ArnoldMoteWealthManagement yea i get it now. thanks
Dear everyone: Use a headset mic, not the one on your laptop. TY.
Concerning the 30 days before in the wash sale rule..... If I sell all my shares of a particular stock on say March 1st(even including the ones I bought on February10th)..... does that Feb 10th purchase affect tax loss harvesting? Or only does the Feb 10th purchase affect the tax loss harvesting if they remain in my account?
Hi Bill, thanks for watching and for the question. Yes that February 10th purchase will have some impact. There are a few examples in IRS Publication 550, here's one that I think is most similar to your question and will hopefully help answer your question:
"Example: Purchased Within 30 Days Before Sale - You bought 100 shares of M stock on September 26, 2014, for $5,000. On December 19, 2014, you bought 50 shares of substantially identical stock for $2,750. On December 26, 2014, you bought 25 shares of substantially identical stock for $1,125. On January 9, 2015, you sold for $4,000 the 100 shares you bought in September. You have a $1,000 loss on the sale. However, because you bought 75 shares of substantially identical stock within 30 days before the sale, you cannot deduct the loss ($750) on 75 shares. You can deduct the loss ($250) on the other 25 shares. The basis of the 50 shares bought on December 19, 2014, is increased by two-thirds (50 ÷ 75) of the $750 disallowed loss. The new basis of those shares is $3,250 ($2,750 + $500). The basis of the 25 shares bought on December 26, 2014, is increased by the rest of the loss to $1,375 ($1,125 + $250)"