You cannot deduct losses from sales or trades of stock or securities in a wash sale unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:
Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade,
Acquire a contract or option to buy substantially identical stock or securities, or
Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.
kate1234 wrote:I am trying to understand how it works. Let's say I need $30,000 and sell from my taxable account at a loss. First, what methodology makes sense for choosing whether to sell VTSAX or VTMGX?
Second, if I then move $30,000 from the G fund into either C/S or I, are those funds enough different from VTSAX & VTMGX to avoid a "wash" and to allow for tax-loss harvesting? I haven't ever done tax-loss harvesting so forgive me if I have it mixed up.
kate1234 wrote:If we shifted some of that taxable account over to a 529 Plan would the effect be the same? If the 529 were loaded with equities that had dropped by a huge amount when they were needed for college, we could still do the same tax loss harvesting and move a corresponding amount out of the G into C/S?
kate1234 wrote:Thanks for the answers. Currently we are set up with all bonds in the G fund and the taxable account with all equities. If we shifted some of that taxable account over to a 529 Plan would the effect be the same? If the 529 were loaded with equities that had dropped by a huge amount when they were needed for college, we could still do the same tax loss harvesting and move a corresponding amount out of the G into C/S?
kate1234 wrote:Sorry, I probably wasn't clear. We are in retirement so there are no new contributions coming in from income. I am talking about converting maybe $100,000 from our taxable account into a 529 (all in one lump sum, and filing the gift tax return). The kid is a rising junior so we've got just two years of having it grow, then anticipate it reducing by $25,000 in each of the following four years.
The real answer might be that, at this late date, the tax advantage to having those funds in a 529 Plan isn't worth it.
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