Tax Loss Harvesting recently purchased shares

[legolast]

If I own many shares of VOO - Vanguard S&P 500 ETF bought many months ago in a taxable brokerage account and recently bought more within the last 30 days and now with the shares falling even more, can I TLH any or all of the shares that I purchased in the last 30 days while keeping the shares that I purchased more than 30 days ago?

As long as I don't purchase more within the next 30 days after I sell, it wouldn't be a wash sale?

I read the Wiki on this along with the Fairmark site, but it's still somewhat confusing.

Also I do have reinvestments turned off in my taxable account.

[arcticpineapplecorp.]

yes as long as you don't have replacement shares (shares remaining) that you purchased 30 days BEFORE or AFTER the shares you sold for a loss, that's fine (no wash sale).

[arcticpineapplecorp.]

Also I do have reinvestments turned off in my taxable account.

good. and assume you also have cost basis set to SpecID so you can sell only lots that have a loss?

[legolast]

Also I do have reinvestments turned off in my taxable account.

good. and assume you also have cost basis set to SpecID so you can sell only lots that have a loss?

Thanks for the confirmation. This is at Fidelity and I need to double check on how to set the cost basis to SpecID. I see that I can select to specify shares to sell.

[arcticpineapplecorp.]

good. and assume you also have cost basis set to SpecID so you can sell only lots that have a loss?

Thanks for the confirmation. This is at Fidelity and I need to double check on how to set the cost basis to SpecID. I see that I can select to specify shares to sell.

that's good. Do you have multiple substitute funds? You could sell VOO and buy VTI, but then when VTI goes down, you'll want to sell that to harvest losses and need to buy something else (other than VOO and VTI if still within 30 days from sale with loss). So make sure to have a few substitute funds.

[WeakOldGuy]

If I own many shares of VOO - Vanguard S&P 500 ETF bought many months ago in a taxable brokerage account and recently bought more within the last 30 days and now with the shares falling even more, can I TLH any or all of the shares that I purchased in the last 30 days while keeping the shares that I purchased more than 30 days ago?

I believe it it would need to be all of the shares purchased within the last 30 days. If you sold 1/2 of the recent shares, then the remaining 1/2 would be considered replacement shares and have their basis increased by the amount of the loss. That isn't a bad thing other than the loss can't be taken against other taxable gains for taxes.

[legolast]

that's good. Do you have multiple substitute funds? You could sell VOO and buy VTI, but then when VTI goes down, you'll want to sell that to harvest losses and need to buy something else (other than VOO and VTI if still within 30 days from sale with loss). So make sure to have a few substitute funds.

I'll probably just buy VTI in tax deferred IRA for now.

If I own many shares of VOO - Vanguard S&P 500 ETF bought many months ago in a taxable brokerage account and recently bought more within the last 30 days and now with the shares falling even more, can I TLH any or all of the shares that I purchased in the last 30 days while keeping the shares that I purchased more than 30 days ago?

I believe it it would need to be all of the shares purchased within the last 30 days. If you sold 1/2 of the recent shares, then the remaining 1/2 would be considered replacement shares and have their basis increased by the amount of the loss. That isn't a bad thing other than the loss can't be taken against other taxable gains for taxes.

Thanks that's what I figured. I'll see how it goes today.

[arcticpineapplecorp.]

I'll probably just buy VTI in tax deferred IRA for now.

i wouldn't do that. Why?

Wash Sales
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:
1. Buy substantially identical stock or securities,
2. Acquire substantially identical stock or securities in a fully taxable trade,
3. Acquire a contract or option to buy substantially identical stock or securities, or
4. Acquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.

source: https://www.irs.gov/pub/irs-pdf/p550.pdf

[Rocinante Rider]

I do have reinvestments turned off in my taxable account.

It's even more important to make sure that you have reinvestments in the same holding, or a substantially identical holding, turned off in your tax advantaged accounts. The worst outcome would be to sell for a loss in a taxable account only to have the loss disallowed as a wash sale because of a purchase in a tax advantaged account.

[increment]

This is at Fidelity and I need to double check on how to set the cost basis to SpecID. I see that I can select to specify shares to sell.

If you were talking about a mutual fund, then in advance you would have needed to make sure that you are not using an average cost basis. VOO is an ETF so that doesn't apply.

All of the remaining cost-basis methods are forms of specific identification. (The term "SpecID" is how Vanguard describes it.)
For tax-loss harvesting you must make sure that you are selling the right lots. It is best to do this when placing the order (although apparently you are allowed to change lots until settlement time).

[legolast]

I'll probably just buy VTI in tax deferred IRA for now.

i wouldn't do that. Why?

Wash Sales
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:
1. Buy substantially identical stock or securities,
2. Acquire substantially identical stock or securities in a fully taxable trade,
3. Acquire a contract or option to buy substantially identical stock or securities, or
4. Acquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.

source: https://www.irs.gov/pub/irs-pdf/p550.pdf

But if I sell VOO - an S&P 500 Index ETF in taxable and buy VTI - a TSM ETF in tax deferred, I would be OK.

I decided to sell VOO and buy VV - Vanguard Large Cap ETF in taxable instead.

I do have reinvestments turned off in my taxable account.

It's even more important to make sure that you have reinvestments in the same holding, or a substantially identical holding, turned off in your tax advantaged accounts. The worst outcome would be to sell for a loss in a taxable account only to have the loss disallowed as a wash sale because of a purchase in a tax advantaged account.

I don't hold any S&P 500 Index fund except VOO in taxable.

This is at Fidelity and I need to double check on how to set the cost basis to SpecID. I see that I can select to specify shares to sell.

If you were talking about a mutual fund, then in advance you would have needed to make sure that you are not using an average cost basis. VOO is an ETF so that doesn't apply.

All of the remaining cost-basis methods are forms of specific identification. (The term "SpecID" is how Vanguard describes it.)
For tax-loss harvesting you must make sure that you are selling the right lots. It is best to do this when placing the order (although apparently you are allowed to change lots until settlement time).

Yes, I selected the specific lots to sell.

Thanks all for your helpful replies.

[arcticpineapplecorp.]

But if I sell VOO - an S&P 500 Index ETF in taxable and buy VTI - a TSM ETF in tax deferred, I would be OK.

i'm sorry, i must have thought you were selling VTI in taxable and buying VTI in tax deferred.

If you sell VOO in taxable and buy VTI in tax deferred (and also buy VTI to replace VOO in taxable) you'd be fine.

But then you'll have to be careful if you replace VOO with VTI in taxable and tax deferred, if you later want to sell VTI in taxable for a loss (if you also reinvest dividends in VTI in tax deferred, that would create a wash from loss in future VTI shares sold in taxable (for a loss) if done within 30 days before/after selling future shares of VTI for a loss). Make sense?

[legolast]

i'm sorry, i must have thought you were selling VTI in taxable and buying VTI in tax deferred.

If you sell VOO in taxable and buy VTI in tax deferred (and also buy VTI to replace VOO in taxable) you'd be fine.

But then you'll have to be careful if you replace VOO with VTI in taxable and tax deferred, if you later want to sell VTI in taxable for a loss (if you also reinvest dividends in VTI in tax deferred, that would create a wash from loss in future VTI shares sold in taxable (for a loss) if done within 30 days before/after selling future shares of VTI for a loss). Make sense?

Yeah, I have VTI in most of my tax deferred/tax free accounts and none in taxable.

I have a bit of a soft spot for the S&P 500 index fund, since that's what I started with (VFINX) back in 1999 when I first setup my Roth IRA, long before I'd heard of Bogleheads.

But after reading here, I was convinced to be more diversified with a TSM fund, so I now hold far more of that.

And if the Bear bites, I can do this again after 30 days.

[WeakOldGuy]

Don't forget there are other total market ETFs besides VTI that you can use.

[PapaDoodle]

I do have reinvestments turned off in my taxable account.

It's even more important to make sure that you have reinvestments in the same holding, or a substantially identical holding, turned off in your tax advantaged accounts. The worst outcome would be to sell for a loss in a taxable account only to have the loss disallowed as a wash sale because of a purchase in a tax advantaged account.

Reading about TLH I have wondered about this exact situation. Since you bring it up... am I to assume that a TLH using a growth fund in a taxable account can be affected by reinvesting a growth fund in a separate tax deferred account? Last question. Is it a percentage? Or if 10k is harvested in a tax account will it be a complete wash if $200 is reinvested in a tax sheltered account. Or is it just a small wash so to speak?
I hope I'm making sense. I'm still learning BogleSpeak.

[Rocinante Rider]

It's even more important to make sure that you have reinvestments in the same holding, or a substantially identical holding, turned off in your tax advantaged accounts. The worst outcome would be to sell for a loss in a taxable account only to have the loss disallowed as a wash sale because of a purchase in a tax advantaged account.

Reading about TLH I have wondered about this exact situation. Since you bring it up... am I to assume that a TLH using a growth fund in a taxable account can be affected by reinvesting a growth fund in a separate tax deferred account? Last question. Is it a percentage? Or if 10k is harvested in a tax account will it be a complete wash if $200 is reinvested in a tax sheltered account. Or is it just a small wash so to speak?
I hope I'm making sense. I'm still learning BogleSpeak.

It's a wash sale only if the funds are "substantially identical." Selling one "growth fund" at a loss and buying a different growth fund within the thirty days before or after that sale would not created a wash sale unless both funds were for all practical purposes the same, such as index funds that track the exact same index. Even then, it's not entirely certain whether it would be a wash sale if the funds were run by different custodians. I'd still avoid, for example, selling a Vanguard S&P 500 index fund at a loss and replacing it with a Fidelity S&P 500 index fund. The usual scenario applies to shares. Thus, if you sell 100 shares of VTI at a loss, but also buy 100 shares of VTI within the 61 day period extending from thirty days before until thirty days after the sale, you'll have a wash sale.
https://www.bogleheads.org/wiki/Wash_sale

[WeakOldGuy]

Last question. Is it a percentage? Or if 10k is harvested in a tax account will it be a complete wash if $200 is reinvested in a tax sheltered account. Or is it just a small wash so to speak?
I hope I'm making sense. I'm still learning BogleSpeak.

Here is my understanding which may be completely wrong. Hopefully the smarter folks will interject and correct as needed.

It is based on the number of shares. So if you sold 10 shares of VTI for a loss in your taxable, and bought 1 share of VTI within 30 days of that sale in your tax-advantaged (either before or after) then one of those shares that you sold for a loss would be a wash sale. So the loss of of the sale of one of those shares would not be able to be claimed as a taxable loss.

If the purchase didn't involve the same security, but was an essentially identical security then it would be matched dollar for dollar. So if you sold a share of VTI for a loss of $10 in your taxable account and then $1 of VTSAX was reinvested in your tax advantaged account, $1 of the loss would not be a taxable loss.

What I don't know, is how the basis would be adjusted for each of those situations. Is the basis added to the share that was purchased in the tax-advantaged account? If so then this is a loss that is lost forever as far as taxes are concerned.

[PapaDoodle]

Last question. Is it a percentage? Or if 10k is harvested in a tax account will it be a complete wash if $200 is reinvested in a tax sheltered account. Or is it just a small wash so to speak?
I hope I'm making sense. I'm still learning BogleSpeak.

Here is my understanding which may be completely wrong. Hopefully the smarter folks will interject and correct as needed.

It is based on the number of shares. So if you sold 10 shares of VTI for a loss in your taxable, and bought 1 share of VTI within 30 days of that sale in your tax-advantaged (either before or after) then one of those shares that you sold for a loss would be a wash sale. So the loss of of the sale of one of those shares would not be able to be claimed as a taxable loss.

If the purchase didn't involve the same security, but was an essentially identical security then it would be matched dollar for dollar. So if you sold a share of VTI for a loss of $10 in your taxable account and then $1 of VTSAX was reinvested in your tax advantaged account, $1 of the loss would not be a taxable loss.

What I don't know, is how the basis would be adjusted for each of those situations. Is the basis added to the share that was purchased in the tax-advantaged account? If so then this is a loss that is lost forever as far as taxes are concerned.

Thank you. This is what I assume because it makes common sense but I wanted to be sure. Thanks.