Need a quick gut check that this all makes sense.
Left my FA in January to go on my own. Sold all positions in a 15+ fund portfolio to move self-managed 80/20 VTI/VXUS. Put the 1.3% advisor fee and 0.3% ETF fees back into my pocket.
I incurred $44k in realized gains with the liquidation. Estimated tax payment is due before 4/15 – roughly $13k between Fed & State. Don't need to liquidate any more positions to pay this, I have had it off to the side in cash.
Current unrealized losses on the year so far are $12,500.
I want to liquidate the VTI to move to FSKAX and liquidate the VXUX to move to FTIHX – are these “substantially identical”? Seems like not even the IRS knows.
Turn off DRIP to avoid wash rule.
Turn my $44k realized gains into $31.5k. Submit estimated tax payment on only $31.5k now.
If the market continues on it’s downward trajectory, wait until I can lock in another decently large loss to switch back to VTI/VXUS (after 31+ days), in hopes of recouping some (or all) of the estimated tax payment with my refund during tax season next year.
All makes sense? Am I missing anything?
Posted by markprice211
8 Comments
based move
If it has a different ticker then it qualifies as not being substantially identical. I’ve done it before with other ETFs.
You have the cash just pay your taxes dude. You’re not accounting for what could happen to the market during the wash sale period.
Switch to market to market tax reporting with your broker and going forward you won’t have to worry about wash sales or capital loss limit of only $3000
Those swap pairs are the least scary part here. I’d worry more about stray DRIP / auto-buys in any taxable account, and about estimated-tax safe harbor, than about VTI -> FSKAX or VXUS -> FTIHX.
I’m not an expert on this, but if even a VOO and SPY swap doesn’t trigger a wash sale by the broker (nor there are cases of IRS complaining) then I would say you’re pretty safe.
> are these “substantially identical”?
Of course they are not. Don’t make up problems that don’t exist.
You can definitely do that. I personally use ETFs since they have a lot more options. Here’s a nice table to bookmark: [https://www.bogleheads.org/wiki/Tax_loss_harvesting#Substitute_funds](https://www.bogleheads.org/wiki/Tax_loss_harvesting#Substitute_funds)
While the IRS has yet to formally state what they consider substantial identical, I personally try to avoid switching from a fund like VOO to IVV since they follow the same index. Luckily there’s a lot of very similar funds that track different indices, so I TLH to those first.
You don’t need to wait any days either. For example, if you purchase 10K of VTI and it drops 3K, you can immediately sell it and buy something like VOO and reap the harvest with no issues.