This post provides instructions for setting up a Fidelity brokerage account to best prepare for tax loss harvesting. For more background on tax loss harvesting, see my comprehensive tax loss harvesting guide for beginners:
- Part 1: tax loss harvesting background and account preparation
- Part 2: executing the tax loss harvest
- Part 3: what to do after tax loss harvesting plus advanced tips
Fidelity Account Preparation
1. Click on “Accounts & Trade” at the top left of your screen, then click “Account Features”
2. Expand the “Brokerage & Trading” section, then click “Cost Basis Information Tracking”
3. You will now see a list of your accounts with the cost basis and default disposal method for Stocks/ETFs and Mutual funds (four total options for each account).
- Click the “Change” button for each account to set the cost basis for each to “Actual Cost,” which is what Fidelity calls Specific ID.
- For “Default Disposal Method,” it is not important if you always specific the shares you’re selling, but it doesn’t hurt to change this to “Tax Sensitive” for all your accounts.
4. Once you have updated your accounts, return to your “Account Features” page by clicking on “Accounts & Trade” at the top left of your screen, then “Account Features”
5. Expand the “Brokerage & Trading” section, then click “Dividends and Capital Gains”
6. You will see a list of your accounts with reinvestment preferences for both dividends and capital gains. Under the “Action” column on the right, click “Update” to change all of these to “Deposit to Core Account.” When doing this, you can specify that the changes apply to all positions and future purchases to save time. Do this for all your accounts.