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Learning, Sharing, and Teaching => Investor Alley => Topic started by: lcerrito on January 29, 2017, 08:42:06 AM

Title: Tax Loss Harvesting - Which Fund?
Post by: lcerrito on January 29, 2017, 08:42:06 AM
While the stock market is currently climbing up and up, I know it's eventually going to do a downturn and I'd like to be prepared to do some tax loss harvesting for the first time. My taxable account is finally at a high enough amount to make it worthwhile to capture some losses (yay?)! The question I have is: Which Vanguard fund would be compatible with the IRS laws regarding capital loss?

My taxable account is currently 100% invested in VFIAX (Vanguard 500 Index Fund Admiral Class). Would selling the VFIAX and buying into VTSAX (Total Stock Market Admiral Class) be legal for tax loss harvesting? Any other recommendations for Vanguard funds that would be compatible?
Title: Re: Tax Loss Harvesting - Which Fund?
Post by: seattlecyclone on January 29, 2017, 09:38:44 AM
I'm aware of no clear ruling from the IRS as to exactly what does and does not count as "substantially identical" for the purpose of applying the wash sale rule. However Betterment ( and Wealthfront ( are both operating under the assumption that VTI and SCHB are sufficiently "non-identical" to be fine pairs for loss harvesting, and SCHB (Schwab's broad market fund) is much less different from VTI/VTSAX than an S&P 500 fund would be.