What is it called when you sell and reinvest to pay lower taxes?
Every year or so, I sell my investments and then immediately buy them again. I do this because I'm in a low enough tax bracket that I don't have to pay capital gains on my long term investments, so I'm trying to capture as many gains as I can before I rise into a higher tax bracket. I talked to someone a while ago about this and he had a name for it, but I can't remember what it is. Does anyone know what this strategy is called?
In case it is relevant, my investments are all index funds.
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D Stanley gave a correct answer. Let me offer an observation. In a year where any of your investments are down, I'd suggest taking the loss (being mindful of wash sale rules), and use it to offset up to 00 of ordinary (15%) income or to offset the tax of a Roth IRA conversion. Then in future years, continue to use the tax gain harvest strategy.
And note, that even in a year where the S&P or general market is up, one sector might be down. This depends on what type of indexes you are tracking.
One term for what you have done is "reset your cost basis".
It sounds like you're describing tax gain harvesting, where you intentionally realize capital gains in a low-tax-rate period in order to increase your cost basis and reduce future capital gains at higher rates.
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