4 ms·

> Figure out how to do tax loss harvesting. Figure out what a back-door IRA is. Figure out how to take out a loan on your 401(k). I'm not convinced any of thos

> Figure out how to do tax loss harvesting. Figure out what a back-door IRA is. Figure out how to take out a loan on your 401(k). I'm not convinced any of those things is "smart". For example, if LT cap gains is your lowest-rate taxable income, why would you want to offset it? I make sure when I have a cap loss for the year, I have no LT cap gains and keep it to around $3K (which offsets higher-tax-rate ordinary income). Loans against 401(k)s are rarely a good idea, you shouldn't put in money in the first place if you need it before retirement. And I've always thought that (assuming I have any pre-tax Trad IRA money, which would be the case if a ever leaving a job and rolling over the old 401k), it's more effective to use my annual $6K after tax money to pay tax on a larger Roth conversion than to simply go though extra steps to get the $6K into the Roth (greater leverage).

Paul-Craft 3y ago
Re: long term capital gains, the point of tax loss harvesting is to defer capital gains, so you can also defer the capital gains taxes. Re: 401(k), you are assuming knowledge of the future that nobody has. Re: extra steps to do a Roth conversion, it's something that can be done in literally under 5 minutes, at $0 cost, if you have no other money in traditional IRA accounts, so I have no idea what you're talking about.
- PopAlongKid 3y ago
  > the point of tax loss harvesting is to defer capital gains, so you can also defer the capital gains taxes. No, it's not. It is to recognize both taxable cap gains and deductible cap losses in the same year, to net the tax to zero. Nothing is deferred with tax loss harvesting. My point was, why waste a cap loss offsetting low-tax-rate LT cap gains, when instead with planning it can be used to offset higher-rate ordinary income. >Re: 401(k), you are assuming knowledge of the future that nobody has. No. The context was, "beat the tax man". Using 401k loans for tax planning is near the bottom of the list. Using 401k loans for an unexpected emergency is something else entirely. >extra steps to do a Roth conversion The "extra steps" again was not my point. My point was, if you have $6K aftyer tax money to invest, would you rather get $6K into your Roth, or more like $20K into your Roth by paying the tax on a conversion of pre-tax Trad IRA (which presumably you have accumulated after earnings in your first decade or two of work).

Paul-Craft 3y ago

Re: long term capital gains, the point of tax loss harvesting is to defer capital gains, so you can also defer the capital gains taxes. Re: 401(k), you are assuming knowledge of the future that nobody has. Re: extra steps to do a Roth conversion, it's something that can be done in literally under 5 minutes, at $0 cost, if you have no other money in traditional IRA accounts, so I have no idea what you're talking about.

PopAlongKid 3y ago
> the point of tax loss harvesting is to defer capital gains, so you can also defer the capital gains taxes. No, it's not. It is to recognize both taxable cap gains and deductible cap losses in the same year, to net the tax to zero. Nothing is deferred with tax loss harvesting. My point was, why waste a cap loss offsetting low-tax-rate LT cap gains, when instead with planning it can be used to offset higher-rate ordinary income. >Re: 401(k), you are assuming knowledge of the future that nobody has. No. The context was, "beat the tax man". Using 401k loans for tax planning is near the bottom of the list. Using 401k loans for an unexpected emergency is something else entirely. >extra steps to do a Roth conversion The "extra steps" again was not my point. My point was, if you have $6K aftyer tax money to invest, would you rather get $6K into your Roth, or more like $20K into your Roth by paying the tax on a conversion of pre-tax Trad IRA (which presumably you have accumulated after earnings in your first decade or two of work).