Tax Loss Harvesting VTSAX. What to buy?

[therethere]

I'm considering tax loss harvesting this year as I've got anywhere between 3-5k in losses, with no gains other than dividends. My brokerage is all VTSAX. Unfortunately it just reinvested my dividends last week so I can't initiate it for another 30 days. My main question is what slightly similar alternatives could I buy that mainly track the same, but would not be considered a wash sale. Any other hang-ups I need to be aware of? I only started researching it this week based on the big drops.

[ysette9]

I think an S&P500 index fund would be a good partner for tax loss harvesting. The correlation is very close but they are not substantially similar.

[ATtiny85]

Someone with more expertise needs to weigh in, but you don't have to wait. You can sell those shares you just bought and be fine.

It is important to note that the only thing wrong with a wash sale is that you can't claim the loss. It is not illegal.

[dandarc]

Tangential question - would you do this?

Have about $15K in a taxable account currently at a ~4% loss. Could sell it and in addition to the small loss that would reduce taxes for 2022, put the proceeds into traditional retirement accounts (likely wife's IRA and my solo 401K)

In a situation where I can't minimize taxes the way I used to because I went part time middle of last year and took a 40% pay cut. But I still think the tax savings are worth it to lower income this way.

[Heckler]

My Canadian tax law understanding is to replace it with any fund that does not seek to follow the same market index.  In the case of VTSAX, it uses the "Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) through April 22, 2005; MSCI US Broad Market Index through June 2, 2013; and CRSP US Total Market Index thereafter."

https://investor.vanguard.com/investment-products/mutual-funds/profile/vtsax#fund-literature

So, VTI would be a no-no since it follows the same index "Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) through April 22, 2005; MSCI US Broad Market Index through June 2, 2013; and CRSP US Total Market Index thereafter."

https://investor.vanguard.com/investment-products/etfs/profile/vti#fund-management



However, VOO is fair game, as "Vanguard S&P 500 ETF seeks to track the investment performance of the S&P 500 Index"

https://investor.vanguard.com/investment-products/etfs/profile/voo#distributions

You could even pair VOO with VB, since "Vanguard Small-Cap ETF seeks to track the investment performance of the CRSP US Small Cap Index,"

https://investor.vanguard.com/investment-products/etfs/profile/vb#distributions


Source:  https://canadiancouchpotato.com/2020/11/05/finding-etf-pairs-for-tax-loss-selling/

NB:  Canadian perspective of tax law.

[Heckler]

Tangential question - would you do this?

sell one index at a loss, buy a different index and do the tax forms, claiming a capital loss this tax year instead of a capital gain.  Then offset future capital gains with this year's loss.

[dandarc]

Tangential question - would you do this?

sell one index at a loss, buy a different index and do the tax forms, claiming a capital loss this tax year instead of a capital gain.  Then offset future capital gains with this year's loss.

? Not sure what you're responding to with this - was asking very specifically if you would do the thing I laid out up thread. Anyway, already decided to do it and book a whopping $784.44 long term capital loss. More than offsets the dividends received this year so woo for about $50 in tax savings while also moving the funds into tax-advantaged accounts with much larger tax savings.

Getting back on topic - sold VT, zeroing out this account which happens to be the only place I've got anything tracking an "all world index", so buying back in the usual funds in the other accounts I should be good on wash sales. That's another option for OP if you want international exposure, but as others have pointed out probably VOO is your best bet. Also make sure you're not buying anything tracking the same index as VTSAX in an IRA or 401K or what have you - can trigger a wash sale with trades in those accounts as well.

[Heckler]

Tangential question - would you do this?

Sorry, I read " How would you do this?", didn't read the rest, figuring it was all about your holdings...

[talltexan]

I asked around and people tell me that $VTI and $VOO are different enough that tax-loss-harvesting works for them.

[Saving in Austin]

I use VLCAX as an alternative to VTSAX. I've had it for a long time and it seems to move in tandem with VTSAX. It is a large cap index fund with a .05 expense ratio. It is down 20.82% YTD compared to 20.64% YTD for VTSAX.

[getmoneyeatpizza]

I just did this. See post over in taxes. Sold VTSAX for 10k loss and bought VFIAX. Luckily the market dropped in the day after I sold so I bought even lower.

[Car Jack]

So an answer is SCHB.

I do this with VTI, which is the ETF version of VTSAX.

NONE of my taxable account funds re-invest.  This avoids TLH opportunities going away when I decide to do it.

[Tyler]

Just as one datapoint, Wealthfront uses SCHB as an alternative to VTI in their tax loss harvesting algorithm: https://www.wealthfront.com/explore/vti

In fact, their list of alternative ETFs that they use to avoid wash sales is quite useful for DIY types: https://support.wealthfront.com/hc/en-us/articles/4404335475220-Investments-Available-at-Wealthfront-

[SilentC]

Consider buying LQD or even the bond Agg.

[PDXTabs]

I would consider: VIOV, VOO, VEA, VEU, or some combination that you are happy with.

[redcedar]

I would love to know if there is actual irs audit or case precedent that proved or failed to price vtsax and vti is materially similar. By its tax nature and the structural logistics behind that, I want to know it has been proven materially similar or not.

[Tyler]

I would love to know if there is actual irs audit or case precedent that proved or failed to price vtsax and vti is materially similar. By its tax nature and the structural logistics behind that, I want to know it has been proven materially similar or not.

I have no specific IRS case to offer, but if there's one fund swap that I think would definitely qualify as a wash sale it would be trading VTSAX for VTI. Beyond tracking the exact same index, the two funds are so uniquely intertwined in structure (Vanguard patented the idea of packaging an ETF as a share class of a mutual fund) that you can just call Vanguard to convert your money from VTSAX to VTI completely tax free.

[catccc]

The tax loss harvest partner I use for VTSAX is VFIAX.  Like others have suggested here, it is the Vanguard 500 index fund, and commonly referenced as a VTSAX TLH partner.  The ETF version of VFIAX is VOO.  Don't forget to consider other accounts that you may be purchasing similar funds in, such as retirement accounts and possibly even kids accounts.  I've read differing things about UTMA accounts and whether their transactions trigger wash sale rules...

[therethere]

The only other account with recent purchases is DH's retirement account. He is buying the Schwab SP500 fund, SWPPX. While it likely tracks near the same, any idea if this would trigger a wash sale?

[Mr Mark]

i moved into VUSUX a month ago after a tax harvest....

It's mainly long term treasuries.