tax loss harvesting

Forum|Forum|3 years ago
November 6, 2022
2 replies
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I expect a mutual fund to report a large capital gain distribution for 2022. In years past, this fund has always reported these on Form 1099-DIV, Box 2a. No redemptions involved.

I have no other capital gains nor losses for 2022.

I have ordinary income well in excess of the capital gain distribution.

I have the opportunity to tax loss harvest by selling various stocks, either short term loss or long term loss.

Please advise on which to choose and why.

Capital Gains

Critter-3

Level 15

Losses are losses no matter the holding period ... all cap gains and losses are netted against each other on the same Sch D form.

The only thing you have to watch out for is a wash sale ... so anything sold at a loss cannot be repurchased within 30 days prior to and after the sale date.

Anonymous_

Level 15

@Critter-3 is correct, and also ensure that you are not violating the holding period for any dividends (from the shares you are selling) to be considered "qualified dividends".

See https://www.irs.gov/publications/p550#en_US_2021_publink100010075

fanfare

Level 15

The qualification of dividends depends on holding before or after the dividend date, so any dividends on a fund or stock held at least two months will be qualified.

A reinvested dividend can cause a wash sale on your first shares out (FIFO) up to the number of shares obtained from the last reinvested dividend, if you are selling the first shares at a loss.

Same for purchases with new money on an automated schedule (i.e. monthly).

Hal_Al

Level 15

As others have said, capital gains distributions (box 2a of a 1099-DIV) can be offset by either long or short term capital losses.

Capital gains distributions (box 2a of a 1099-DIV) are taxed at long term capital gains tax rates, some of which can be, for lower income people, 0%. I assume by "I have ordinary income well in excess of the capital gain distribution", you mean that you know that your Capital gains distributions will be subject to the 15% rate or higher. And, that is why you want to offset them with losses.