Tax loss harvesting help

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
vencat
Posts: 214
Joined: Thu Sep 10, 2009 6:30 pm

Tax loss harvesting help

Post by vencat » Thu Oct 11, 2018 7:48 pm

I have $4000 and $6000 unrealized losses in Vanguard Intermediate tax exempt fund and Vanguard Tax exempt ETF (VTEB) respectively. What would be a suitable fund or ETF for TLH or should I switch between the two?
Thanks.

User avatar
arcticpineapplecorp.
Posts: 3482
Joined: Tue Mar 06, 2012 9:22 pm

Re: Tax loss harvesting help

Post by arcticpineapplecorp. » Thu Oct 11, 2018 8:25 pm

you can't switch between the two because then you'd be buying something you'd sold within 30 days and would run afoul of the wash sale rule.

some funds you could switch to for 30 days (or more) and then switch back to your original funds.:
short term bond etf
short term treasury etf
intermediate term treasury etf
intermediate term bond etf
short term inflation protected etf
total bond market etf
short term corporate bond etf

none of these are tax exempt, but you'd only be holding them for 30 days or so and then switching back to your original two etfs mentioned.

for funds (to replace the intermediate tax exempt fund) you could use similar funds as the etfs above (but funds/not etfs) or use:
limited term tax exempt
tax exempt bond index

I don't believe any of these would be considered "identical" indices. Perhaps others would chime in to disagree.

Also, don't forget to turn off reinvest dividends and instead choose to receive dividend as cash payment. If you don't and you receive a dividend payment (reinvested) within 30 days in the same fund you sold, you will have lost the ability to have tax loss harvested because reinvested dividends in the fund you sold (if within 30 days) runs afoul of the wash sale rule.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

vencat
Posts: 214
Joined: Thu Sep 10, 2009 6:30 pm

Re: Tax loss harvesting help

Post by vencat » Thu Oct 11, 2018 10:22 pm

Thanks.
By switching between the 2, I meant sequentially. Say, VTEB to Intermediate tax exempt, wait for >30 days and then reverse. Disadvantage, of course, would be that the delay can change the TLH amount.

rkhusky
Posts: 5899
Joined: Thu Aug 18, 2011 8:09 pm

Re: Tax loss harvesting help

Post by rkhusky » Fri Oct 12, 2018 7:25 am

arcticpineapplecorp. wrote:
Thu Oct 11, 2018 8:25 pm
Also, don't forget to turn off reinvest dividends and instead choose to receive dividend as cash payment. If you don't and you receive a dividend payment (reinvested) within 30 days in the same fund you sold, you will have lost the ability to have tax loss harvested because reinvested dividends in the fund you sold (if within 30 days) runs afoul of the wash sale rule.
Only the number of shares purchased with the dividend are washed out. All the other shares sold can be used in TLH. And even then, the disallowed loss is added to the replacement shares, so you will eventually recoup your loss.

For the OP: Just use Limited Term Tax Exempt, it is sufficiently close to Int. TE.

Chris K Jones
Posts: 132
Joined: Sat Jan 20, 2018 6:54 pm

Re: Tax loss harvesting help

Post by Chris K Jones » Fri Oct 12, 2018 7:29 am

I recently did this. I used 50% each of Limited term Tax Exempt and Long term Tax exempt. The combination approximates the duration of intermediate term, but not the maturity. This is the first time I have done TLH so I am no expert, but it seems to have gone off without a glitch. Best wishes.

Post Reply