Author Topic: Tax loss harvesting question: timing of new purchases  (Read 789 times)

Clean Shaven

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Tax loss harvesting question: timing of new purchases
« on: September 01, 2015, 12:07:24 PM »
I've never done tax loss harvesting ("TLH"), and am learning about it now --

I currently have a loss of about $5K, all in VTSAX.  If I exchange it for VTIAX or VLCAX (as suggested by the Mad Fientist as a comparable to VTSAX - link below), I think the steps below are what I would want to do -- and anyone, please correct me if I'm doing it wrong:

Mad Fi link on TLH:
http://www.madfientist.com/tax-loss-harvesting/

1) Exchange 100% of VTSAX for VLCAX.
2) Do not buy any more VTSAX for at least 30 days.
3) Hold VLCAX (in the amount exchanged in step 1) for 1 year -- so as to benefit from long-term capital gains.
4) After 1 year, if I want, exchange VLCAX back into VTSAX.

Question:  If I exchange 100% of VTSAX for VLCAX, can I resume purchasing VTSAX 30 days after the exchange, using new money (i.e. cash purchase)?  Would any gains in VTSAX bought with new money have to be offset against the loss I am seeking to harvest?  And if so, would it be wiser to halt ALL new money purchases of VTSAX for 1 full year (instead investing in VLCAX)?

Also, I hold a lot of VTTHX (target 2035 retirement fund), which in turn holds a lot of its assets in VTSMX (investor class of VTSAX).  Is that going to prevent me from doing TLH of VTSAX in my taxable account?

forummm

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Re: Tax loss harvesting question: timing of new purchases
« Reply #1 on: September 01, 2015, 12:27:22 PM »
You could also buy VFIAX instead (500 index fund). It's still different than VTSAX but very, very tightly correlated.

Yes, you can resume purchasing VTSAX 31 days (to be safe) after the exchange. If you have VTSAX in an IRA make sure it doesn't have dividends reinvesting into that fund during that time.

Your question about VTSMX inside the VTTHX is a good one and I don't know the answer.

bacchi

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Re: Tax loss harvesting question: timing of new purchases
« Reply #2 on: September 02, 2015, 08:41:11 AM »
Reminder: A wash sale is +-30 days from the date of the sale. It's not only post-sale.