Top 5 Tax Loss Harvesting Tips

Whenever the stock market loses at least 10% of its value, as it does most years, those of us with taxable brokerage accounts have an opportunity to lower our tax bills.

Tax loss harvesting is a simple maneuver. You’re selling one asset and buying another. However, it’s often misunderstood and not done in an ideal manner.

The following are my top five tips and clarifications, along with some bonus tips at the end.

I generally like to see a four-figure loss before pulling the TLH trigger. You’ll notice that in my Vanguard example, I took a loss for under $1,000. 

#1 Take a big enough loss

My advice is to never purchase something you wouldn’t be comfortable owning indefinitely. An exception can be made for generous souls who donate appreciated assets to charity. 

#2 Buy something you’d be comfortable owning forever

If you have multiple newly-purchased lots and some of them have gains while the other have losses, you still have to sell all lots purchased in the last 30 days to avoid a wash sale.

#3 You CAN sell something you just bought

You’re definitely not locking in an actual loss unless you only sell and choose not to buy a similar asset. If you do, that’s not really tax loss harvesting. 

#4 You are NOT locking in a loss

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