📉 TAX LOSS HARVESTING, DIVIDENDS, AND WASH SALES 📉 〰️〰️〰️〰️〰️〰️〰️〰️ A possible #silverlining to my unfortunately having so many badly hammered positions is the opportunity to sell one or some for a loss and then to "write off" the loss(es) for fewer taxes to pay in April 2023 or future tax years. This strategy is called #taxlossharvesting (TLH) and is one worth considering at the end of the year when you hopefully know how much you can still "write off" — yup, there's an annual limit, currently $3k per year, but you *can* carry them to future years. Experienced investors here know plenty about #tlh so I'm writing this for those new to it. One thing that I haven't seen in my feed is any mention of the specific risk of trying to TLH a #dividend stock... 🤔 Like all things money and investments, TLH involves risks, specifically with the IRS #washsalerule – this is where an investor buys or sells any amount of shares or fractions of a stock within 30 days of executing a TLH sale, which makes it ineligible for a tax write off. In other words, if you have a #washsale then there's no tax benefit, just a loss! The rule also applies to any #dividend stock holdings where you've turned on "DRIP," or dividend reinvestment, where the cash dividend is automatically and immediately used to buy fractions of a share — or whole ones, if you're a high roller 😱 🤑. But I didn't buy the stock, right? Unfortunately, a bot did it for you! Example: my winter 2021–2022 #fud and #fomo pushed me into chasing dividend stocks (🎶 "don't go chasing dividends..." 🎶), including $RQI which has an attractive one. Its annual dividend rate is $0.96 per share for a dividend yield of 8.63% at the time of this post with $11.60ish stock price. Unfortunately I bought it near its #alltimehigh so I have a feeling I'll be red with it for a long while during this who-knows-how-long-of-a-recession-bear-winter-bull-trap market; that gives me an itch to dump it before the end of the year and swap it for something that I feel has better price appreciation, i.e. #growth . Trouble is that it earns monthly dividends so I'm going to have to turn off DRIP in order to TLH this position without a 30-day wash sale. Here’s a chart with other equities I’m tempted to swap it for. RQI Position ▪ All Time Gains: -$6.35 (-34.46%) ▪ Total Holdings: $12.07 ▪ Shares: 1.04159 ▪ Average Price Paid: $17.68/share References: ▪ https://www.investopedia.com/articles/taxes/08/tax-loss-harvesting.asp ▪ https://www.investopedia.com/terms/d/dividendreinvestmentplan.asp ▪ https://www.wegnercpas.com/harvesting-tax-losses-beware-of-the-wash-sale-rule/ DISCLAIMER: "I'm always wrong. Except when I'm right." This isn't investment advice!
Sep 28, 2017 - Sep 28, 2022