Author Topic: Help with Wash Sales Harvesting Gains/Loses  (Read 2257 times)

George

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Help with Wash Sales Harvesting Gains/Loses
« on: August 06, 2015, 09:53:46 PM »
I'm recently retired and I read all the articles on Harvesting Gains/Loses, but I need help with the details of the execution as to not trigger any wash sales. I'm goin to set up the account as to have the interest and capital gains send to my checking account or Vanguards money market account and I also will ask for specific identification.
I'm going to buy 1,000 shares of VTSAX and hold them for over a year ( 366 days )and since Vanguard will not allow me to buy back the same shares of VTSAX with in 60 days I'm goin to move them to VFIAX in order to do TGH/TLH.
 
1. What is the best month or date to do the Harvesting transfer. ( guessing December )
 
1. How do I move the funds to VFIAX, do I sell, transfer, exchange, what's the right word.
 
2. After the funds are in VFIAX, how long do I wait to bring them back to VTSAX as to avoid a wash sale when I buy the 1,000 shares of VTSAX again.( I'm guessing 61 days )
     
3. What happens to the VFIAX account being now empty, should I close the account and open again next year or leave it open. I imagine if I leave it open I need to have at least $3,000 for Vanguard to leave it open till next year until I Harvest again, but buy keeping it open it and having other moneys in there it must make it harder to keep track of the $3,000 and keeping it separate from the harvesting moneys.
 
4. Vanguard told me I qualify for a brokerage account, what are the specific benefits of having one if I only harvest once or maybe twice a year.
 
5. Should I use an ETF to do Harvesting and what are the specific benefits of an EFT, supposedly the VTSAX and VFIAX pay out mostly qualified dividends.
 
 
Thank you 
       

seattlecyclone

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Re: Help with Wash Sales Harvesting Gains/Loses
« Reply #1 on: August 07, 2015, 01:16:47 AM »
1. What is the best month or date to do the Harvesting transfer. ( guessing December )

It really doesn't matter. You'll have a better idea how the rest of your tax picture fits together toward the end of the year, but I can't think of another reason you might want to trade in one month versus another.

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1. How do I move the funds to VFIAX, do I sell, transfer, exchange, what's the right word.

I think Vanguard calls it an exchange on their website. For the purpose of taxation this is no different from selling the old shares and buying new ones.

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2. After the funds are in VFIAX, how long do I wait to bring them back to VTSAX as to avoid a wash sale when I buy the 1,000 shares of VTSAX again.( I'm guessing 61 days )

Wash sales can only happen when you have a loss. To avoid wash sales, don't buy any of the same fund within 30 days (before or after) selling for a loss. If you're harvesting gains, you can buy the replacement shares back right away without going to an intermediate fund first.
     
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3. What happens to the VFIAX account being now empty, should I close the account and open again next year or leave it open. I imagine if I leave it open I need to have at least $3,000 for Vanguard to leave it open till next year until I Harvest again, but buy keeping it open it and having other moneys in there it must make it harder to keep track of the $3,000 and keeping it separate from the harvesting moneys.

You won't have a separate account for each fund. All of your funds will be in the same account. This will not be an issue.
 
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4. Vanguard told me I qualify for a brokerage account, what are the specific benefits of having one if I only harvest once or maybe twice a year.

The brokerage account will allow you to trade stocks and ETFs in addition to mutual funds. That's basically the only difference. You don't have to do this, but the option will be there if you go with the brokerage account.
 
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5. Should I use an ETF to do Harvesting and what are the specific benefits of an EFT, supposedly the VTSAX and VFIAX pay out mostly qualified dividends.

Vanguard doesn't apply their frequent trading policy to ETF shares, so you may decide to go with ETFs if you wish to repurchase your shares sooner than 60 days after selling. Other than that, the main difference between the ETF and mutual fund shares will be that you trade ETFs during the stock market open hours based on its real-time market price, while the mutual funds are traded at the same price for all orders placed that day.

Are you planning to purchase health insurance through your state's ACA exchange? If so, you should be aware of how tax gain harvesting will affect your insurance premium subsidies. The nominal tax rate for long-term gains is zero for people in the 15% bracket or below, but the health insurance premium credit phase-out adds a de facto marginal income tax on this money.

brooklynguy

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Re: Help with Wash Sales Harvesting Gains/Loses
« Reply #2 on: August 07, 2015, 10:28:46 AM »
1. What is the best month or date to do the Harvesting transfer. ( guessing December )

It really doesn't matter. You'll have a better idea how the rest of your tax picture fits together toward the end of the year, but I can't think of another reason you might want to trade in one month versus another.

The most important impact the timing will have on the harvest is the size of the harvestable gains or losses, which is beyond your control.  If market movements present an opportunity for harvesting gains or losses at a given time during the year, you may want to execute the transaction then to "lock in" the harvest (waiting until later in the year to execute the harvest presents the risk that the available harvest for those shares will be smaller, but of course also leaves open the possibility that it will be bigger).

Vanguard will not allow me to buy back the same shares of VTSAX with in 60 days I'm goin to move them to VFIAX in order to do TGH/TLH.     

Keep in mind that Vanguard's frequent trading policy does not apply to transaction requests submitted by snail mail, so that's another way to get around the 60 day restriction.

George

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Re: Help with Wash Sales Harvesting Gains/Loses
« Reply #3 on: August 07, 2015, 01:44:29 PM »
1. So by sending a letter to Vanguard requesting to buy back the shares I can buy back the shares a few days later, or I can open a brokerage account and using EFTs I can Harvest Gains the same day.


2. But if I'm goin to harvest Loses I think I still need an intermediate fund like VFIAX so that I can park the shares there until and can buy them back from VTSAX  60 days after the sale.


3. Since all the funds are in the same account even do they are different funds, Do I understand correctly that I don't have to keep other moneys in the intermediate fund I can just leave the fund with a zero balance because they are in the same account until I harvest again in one year.


Yes my wife buys health insurance thru the Marketplace, I'm not sure if is the thru the State or the Federal Government, we leave in Florida but Thank you I'm goin to be careful with that. 


Please correct me in I'm in error, Thanks for all the responses, all have been very helpful.

     

seattlecyclone

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Re: Help with Wash Sales Harvesting Gains/Loses
« Reply #4 on: August 07, 2015, 02:15:11 PM »
1. So by sending a letter to Vanguard requesting to buy back the shares I can buy back the shares a few days later, or I can open a brokerage account and using EFTs I can Harvest Gains the same day

Yes.

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2. But if I'm goin to harvest Loses I think I still need an intermediate fund like VFIAX so that I can park the shares there until and can buy them back from VTSAX  60 days after the sale.

The 60-day limit is a Vanguard requirement rather than a tax requirement. For tax purposes, 30 days out of the original fund is sufficient to avoid wash sales. With ETFs you can be in the intermediate fund for 30 days instead of 60. Your choice!

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3. Since all the funds are in the same account even do they are different funds, Do I understand correctly that I don't have to keep other moneys in the intermediate fund I can just leave the fund with a zero balance because they are in the same account until I harvest again in one year.

Yes, you don't have to keep any money in a particular fund to keep your account open. You'll just sell all your shares of one fund, use the money to buy shares of another fund, and do the opposite trade a month or two later. This is all in the same account.