Beyond the $3k you can offset every yea for ordinary income that I'm not arguing about (but it's just $3k/year)
What you are missing is the time value of money in my example; tax loss harvesting allowed me to pay the same dollars in tax in a later year.
In 2008, I sold for a capital loss, which had not been used up by 2013. In 2013, I needed to sell at a market peak, and took a $4000 capital gain which was offset by carryover losses.
Thus I paid no tax on the gain in 2013, but I had a $4000 lower basis on the shares I bought in 2008. If I sell those shares in 2033, I will owe $600 additional tax because of the $4000 lower basis. As a result of tax loss harvesting, I saved $600 in 2013 and will pay $600 in 2033. But that $600 I did not pay in 2013 could stay invested, and will be worth much more than $600 in 2033.
(This is still by far the smallest of the benefits. Most of my 2008 losses offset ordinary income at 25%, 28%, and 24% at $3000 per year, not capital gains at 15%. And some of my replacement shares were donated to charity and thus the reduced basis became irrelevant.)
That's fine. If you had to sell in 2013 a portion of the shares, then you can use the capital loss of all the shares against the capital gain of that portion of the shares. Saving taxes is good. But that's a particular scenario. I also use TLH so I can sell a particular set of stocks I have (from a time before I was a BH and decided to invest on index funds). But you need to know what you are going to sell to use those TLH losses against.
Statistics: Posted by international001 — Fri May 24, 2024 11:28 pm — Replies 248 — Views 31910