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.
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.
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.
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.
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.
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.
