Thursday, September 21, 2017

Tax loss harvesting

I did several transactions today in my brokerage to finish all of my tax loss harvesting for 2017. I should net around $3000 in losses which I will use to reduce my taxable income this year. I estimate that I can get around $1000 in state and federal tax credit back, so my loss will be reduced to $2000.

Several of these trades are temporary and I will be looking to revert some of them back after the wash 30 day rule. My portfolio's dividend income has dropped due to the temporary positions but it should be over the $10,000 in dividends a year relatively quickly in a few weeks as more cash piles in.

Selling is rare in my portfolio. The usual time I sell is to harvest -$3000 in losses each year since the taxes I pay each year are high. I also take this time to offset the gains from positions that are being bought out.

I get 100 free trades a month with my broker. So all these trades were done free. I paid around 12-14 cents per sell because the SEC charges a sell fee, so I probably paid up to a $1.00 in SEC sell fees.

Sold all of Hormel (HRL) - Sold $5777  Harvested -$530
Replaced MMM and NEE (split evenly)
I intend to buy back Hormel after the 30 day period but the position will likely first start at $3k, I won't be buying back all $6k at once. I am not a fan of its low yield, it needs to be higher. I prefer a 2.5% or higher yield on HRL.

Sold part of General Mills (GIS) - Sold $6888  Harvested -$521
Replaced with XEL + JNJ + ITW (split evenly)
I intend to buy back General Mills after the 30 day period if it falls to a 4% yield.

Sold all of JM Smucker (SJM) - Sold $1942  Harvested -$419
Replaced with MDT
I do not have an urge to buy back SJM if I buy back GIS/HRL. It's a secondary quality stock on my list, behind GIS and HRL (who are in the same food sector that is getting hit hard right now). I would rather pickup a utility company with a higher yield than what SJM sports today.

Sold part of Kimberly Clark (KMB) - Sold $2144  Harvested -$124
Replaced with D
I intend to buy back KMB after the 30 day period. I still hold a relatively decent position.

Sold part of Starbucks (SBUX) - Sold $3309  Harvested -$165
Replaced with GD
Starbucks is a hold to me. I do not have an urge to buy it back after the 30 day period. I tend to limit how much consumer discretionary companies I buy. I want to fill up my utilities, healthcare, and industrials before I add more to discretionary stocks.

Sold part of Kraft Heinz (KHZ) - Sold $2396  Harvested -$247
Replaced with KO and MDT
KHZ is a hold to me. I do not have an urge to buy it back after the 30 day period as I still hold a chunk of it. If it goes over 3.6% yield that will interest me.

Sold part of Altria (MO) - Sold $22,000  Harvested -$1853
Replaced with $12,000 BTI and $10,000 PM
I will be selling BTI to buy back my MO after 30 days. I'll keep the PM as it is so in the end my position of MO to PM will roughly be evenly split (50 / 50). I like the MO business and it feels awkward to have sold it for the temporary 30 days. I already had the stock on the ex-dividend so I will get the fat dividend check next month. I am hoping any gains in tobacco will be felt by the BTI's American position in RAI (Reynolds American). PM and international segment of BTI trade rather differently than American MO now. There isn't another tobacco American company I can really replace MO with temporarily, VGR isn't really a good pick. So I stuck with BTI and its ownership of RAI.

Total tax loss harvesting is around -$3859

I offset the losses with two gain sells. BCR is being acquired so I will have to sell soon as BDX is acquiring it this fall. WTR I sold because the position was way too small and I did not want to follow another utility small position in my portfolio. WTR is a great company but I hold a lot of good utilities already that yield higher %.

Sold CR Bard due to being acquired (BCR) - Sold $2227  Gain +$670
Replaced with utilities NEE + D + XEL + T

Sold Aqua America (WTR) - Sold $1040   Gain +$90
Replaced with  utilities NEE + D + XEL + T

Total sell gain $760

Net tax loss harvest = -$3099

Here is a treemap showing how my portfolio currently stands. Overall the distributions remain relatively similar. I have tried to increase my weighting in healthcare and utilities and industrials so that my portfolio is more diversified.

I'll write back on October 23 when I revert some of my tax loss harvest trades! Stay tuned.



  1. Looks like quite a bit of action YD. I've never specifically set out to do tax loss harvesting but I've always considered it. I think it might be time to look closer at my portfolio to see if there's anything worth harvesting especially since my wife and I should be moving up a tax bracket with me returning to work this year.

  2. Hi YD. Which broker do you use giving you free trades / month?
    Does it matter if the losses are long term vs short-term (i.e. stock was held for more or less than 1 year)?

    1. I use Merrill Lynch. You need a portfolio size over a certain amount to get free trades.
      If your losses are short term they have to be first used to offset short term gains. If there are more short term losses than long term losses, you can use the remainder to offset long term gains too. You'll have to check with your tax adviser on this topics as they get rather complex.

  3. I like your portfolio much better as it sits. Leave it! :)

  4. I'll be interested to see what you do with your tax harvested losses. I'm sure you have some plan up your sleeves and are not going to let those losses go to waste :)


  5. YD no!!!! Keep your MO!!! Best stock ever love you man don't move out of MO! :)