[klyrs]

> Although this is also available to masses .

Not in any meaningful sense. Only the ultra-wealthy can wipe out the lion's share of their tax bill through this loophole. From the article:

> Someone like Ballmer can easily deploy $100 million in losses to cancel out a $100 million gain from selling some of his vast Microsoft holdings. It’s a very different story when it comes to wages and other forms of income, of which only $3,000 can be offset. On average, only the top 0.001% of taxpayers made a majority of their income through investment gains in 2018, according to public IRS data.

[missedthecue]

If he's eating $100 million in losses in one investment and gaining $100 million in another, he's not any richer at the end of the year. I'm not sure what the outrage is.

But like you say you can only deduct $3000 of capital losses per year. Completely and entirely immaterial to a billionaire like Ballmer, but very valuable to someone in the middle class or lower.

[klyrs]

The whole point of wash sales is that he's not eating $100M in losses. He's moving money between two nearly-identical stocks, which happens to look like a loss on paper at the moment that the deal occurs.

And for somebody to whom $3k is a significant amount of money, fucking around on the stock market to engineer a $3k on-paper loss is quite out of reach.

[missedthecue]

But the maximum benefit of a wash sale is only $3000 in deductions, which he is entitled to, but does not really effect his financial situation in any way.

[klyrs]

Not on capital gains, no:

https://turbotax.intuit.com/tax-tips/investments-and-taxes/g...

When used to offset other kinds of income, the $3k limit applies.

https://turbotax.intuit.com/tax-tips/investments-and-taxes/c...

[dataflow]

> you can only deduct $3000 of capital losses per year

Edit: I thought that limit is just for your ordinary income but there seems to be disagreement on this?

[ctchocula]

You are correct and missedthecue is incorrect.

IRS laws say you can deduct $3000 ordinary income (i.e. income earned by working, so doesn't include capital gains) per year and deduct without limit against capital gains. Should your capital losses exceed your capital gains that year, you can carryforward the rest of the capital losses without limit onto the next year 2023, 2024, etc.

The whole point of the article is that "tax loss harvesting" beneficial to Steve Ballmer and the other billionaires mentioned in the article, because they have $Bs in capital gains to begin with (Steve Ballmer had highly appreciated MSFT stock as mentioned in the article). An average Joe like you and me even if we have that much capital losses would find it difficult to find the capital gains to deduct against, so we're typically limited to only $3000 per year deducting against ordinary income (compare against no limit for capital gains), which is much less useful tax shield compared to someone like Steve Ballmer who gets most of his income from capital gains, and who therefore can use his massive cap losses to shield against taxation much more effectively. This is the part that makes "Although this is also available to masses" somewhat moot. Even though it's "technically" possible, the masses don't have the massive capital gains to actually deduct against, so they don't benefit from this to nearly the same magnitude as someone who draws most of their income from capital appreciation.

Therefore, one could argue that this section of the tax code is "unfair" in year 2023. The article makes the case that wash sale rule was effective in the 1920s, but that in the 100 years that have passed, technology has made evading the wash sale rule trivial (especially for billionaires), so the rule as drafted in the 1900s is no longer effective at preventing what it intended.

Source: https://www.irs.gov/taxtopics/tc409

[refurb]

Absolutely the masses can use it.

Last year was a great time to do it. SP500 was down, but many tech stocks weren't (yet).

Sell your Vanguard ETF, use the loss to offset the tech stock you sold with huge gains. Buy back another ETF that is highly correlated with the SP500.

Net capital gains = $0 and you still hold the same SP500 position as before.

[anonymouskimmer]

> "Absolutely the masses can use it."

It looks like the majority of people who own stock own it in things like retirement accounts[1, Table 3.]. Tax-deferred retirement accounts apparently can't use this trick[2].

1 - https://wallethacks.com/stock-ownership-in-america/

2 - https://www.irs.gov/newsroom/what-if-my-401k-drops-in-value

[foxyv]

Betterment lets you do it through their pseudo index fund.