Tax lost harvest vnjux or not?

[scorcher31]

Currently have about 200k in vnjux which is a tax free nj municipal bond fund. If I sell about 60 or 70k of it I can tax loss harvest 5k or so. I would move this to vusxx or the treasury money market fund which is where i keep most of my cash like a high yield savings. Plan would be to wait 31 days and put it all back in vnjux. Would you do this or is the risk too big?

[sycamore]

I vote yes: do the TLH, buy VUSXX, wait 31 days before going back to VNJUX.

[scorcher31]

So this would net me about 2k I guess the risk is that vnjux goes up 3% + in that time negating the gains.

[sycamore]

How much does the fund move in a typical month or so? What's the trading range?

[toddthebod]

So this would net me about 2k I guess the risk is that vnjux goes up 3% + in that time negating the gains.

The solution is to choose a different partner fund that you would be okay with holding longer term. There are a number of other New Jersey municipal bond funds out there (unfortunately none with the same low expense ratio.) You could also consider buying individual bonds.

[FootballFan5548]

I hold a similar amount in VNJUX. I also hold an equal amount of VWUIX (muni bond intermediate). You could put the 60-70 in that VWUIX to avoid any taxable interest.
Remember to turn of dividend reinvesting if it's on to make sure you don't trigger a wash sale

[retiringwhen]

Remember, you cannot take a loss for VNJUX on NJ taxes as it is already tax-exempt for capital gains income. This means it cannot offset gains in a different taxable fund/investment.

Still usable for Federal Income Tax.

[scorcher31]

I'm not sure how to figure out typical trading range of the fund. I think vwuix would be federal tax free but not tax free in nj right? For a month not a big deal, but again my plan would be to Go back to vnjux in a month if I do this.

[sycamore]

I think vwuix would be federal tax free but not tax free in nj right?

Right.
VNJUX's dividend distributions were 4.02% from New Jersey in 2024.
So nearly all VWIUX dividends were taxable by NJ.

Source: https://investor.vanguard.com/content/d ... 022025.pdf

[Correction, see retiringwhen's post: "100% of VWIUX dividend income is taxable by the State of NJ as it does not meet the requirements for a QIF (80% of assets must be qualified as in NJ exempt or Federally exempt.)"

[retiringwhen]

100% of VWIUX dividend income is taxable by the State of NJ as it does not meet the requirements for a QIF (80% of assets must be qualified as in NJ exempt or Federally exempt.)

[retiringwhen]

I'm not sure how to figure out typical trading range of the fund.

Try something like this: https://www.marketwatch.com/investing/f ... rch_symbol

range in the last 52 weeks is: $11.14 to $11.62. dividends don't seem to impact daily prices as dividends are declared daily.

[scorcher31]

I'm going for it but have to wait another 28 days or so. After closer inspection I can sell less shares for almost the same loss. I'm going to use my vusxx which I already have 230k in and then just put it back in vnjux after a month. This is presuming my losses don't disappear in 28 days when I can sell.

[DrDubious]

If I understand it correctly NJ has some limitations on tax treatment that make TLH less advantageous; specifically I do not believe losses can be carried forward.

I know there are also some idiosyncrasies surrounding TLH using a muni fund in general (sorry I can’t be more specific, I just remember seizing up when trying to grasp it previously). I think I have seen it discussed here at BH previously.

I have avoided the issue just because I don’t trust myself enough not to blow it somehow.

[retiringwhen]

If I understand it correctly NJ has some limitations on tax treatment that make TLH less advantageous; specifically I do not believe losses can be carried forward.

Correct, realized losses can only be used to offset gains in the current tax year, no carry forwards.

Additionally,, NJ QIF (funds with at least 80% Exempt assets) Exempt Bond funds have special treatment for realized gains and losses, in particular they are exempt from taxation therefore they are not available to offset taxable gains, so essentially they cannot be TLH'd for taxable gains and TLH'ing for exempt income is kind of pointless

The exemption is a great thing actually, just makes tax loss harvesting moot.

[scorcher31]

Never really have capital gain that I claim so nothing to offset in nj. To my understanding it does not offset dividends, which are separate on my tax statements. I'm only doing it for the federal 3k ordinary tax deduction and carry forward.

[retiringwhen]

That's right, VNJUX is a perfect TLH partner for creating Federal carry forwards as long as you don't have gains you want to wipe out in NJ.

[grabiner]

If I understand it correctly NJ has some limitations on tax treatment that make TLH less advantageous; specifically I do not believe losses can be carried forward.

This is correct but not relevant here. NJ does not tax capital gains and losses on NJ "qualified investment funds" which hold NJ-tax-exempt bonds.

It might be relevant if you switch from the NJ fund to a national fund to keep your muni exposure, and then sell the national fund for a capital gain or loss. The gain will be taxed by NJ, while the loss will be wasted on your NJ tax unless you have a gain in the same year to offset it.

I know there are also some idiosyncrasies surrounding TLH using a muni fund in general (sorry I can’t be more specific, I just remember seizing up when trying to grasp it previously).

Not relevant here; this fund accrues dividends daily, so the 6-month rule does not apply.

[kincomplete]

100% of VWIUX dividend income is taxable by the State of NJ as it does not meet the requirements for a QIF (80% of assets must be qualified as in NJ exempt or Federally exempt.)

Isn't the 1.10% DC + 0.26% GU + 1.88% PR + 0.02% VI tax free in NJ as per the federal obligations rule?

[retiringwhen]

100% of VWIUX dividend income is taxable by the State of NJ as it does not meet the requirements for a QIF (80% of assets must be qualified as in NJ exempt or Federally exempt.)

Isn't the 1.10% DC + 0.26% GU + 1.88% PR + 0.02% VI tax free in NJ as per the federal obligations rule?

No.

[grabiner]

100% of VWIUX dividend income is taxable by the State of NJ as it does not meet the requirements for a QIF (80% of assets must be qualified as in NJ exempt or Federally exempt.)

The "qualified investment fund" rule applies to capital gains, not dividends; NJ does not tax capital gains on NJ tax-exempt securities, and that exemption extends to such securities held in a qualified investment fund.

NJ does not tax the proportion of dividends on NJ tax-exempt securities held by any fund. (There are several states which require 50% of a fund to be invested in state tax-exempt securities to get a partial dividend exemption, but NJ is not one of them.)

[Michael128649]

Taxloss harvesting can be a helpful strategy to offset gains, but it comes with considerations:

Moving your funds into a money market fund like VUSXX for 31 days is a safe option, but you may miss out on potential market gains in the meantime. If you’re comfortable with this shortterm shift and the loss is significant enough to make a meanngful impact on your tax situation, it can make sense....

Just ensure that the risk of missing a potential rebound during the 31-day period is worth the tax savings.

[grok87]

I'm not sure how to figure out typical trading range of the fund. I think vwuix would be federal tax free but not tax free in nj right? For a month not a big deal, but again my plan would be to Go back to vnjux in a month if I do this.

i would park the funds in VWLTX (national long term tax-exempt) rather than vusxx. VWLTX and VNJUX have similar durations of around 8 years whereas VWIUX is shorter. Unless you happen to know the direction of interest rates over the next couple of months. lol
cheers
grok87

[retiringwhen]

EDITED

I stand corrected, yes the debts of DC, Puerto Rico and Guam are considered exempt by NJ as Federal Obligations, I had thought DC is not, that is considered a local debt obligation. I just answered thinking about DC, and forgot the Federal nature of the territories. I just realized that D.C. is actually called out in GIT-5 (see page 6)

Back to support this argument, see GIT-5: https://www.nj.gov/treasury/taxation/pd ... e/git5.pdf

As an aside, I haven't owned any of these Muni funds for a few years since Treasuries have been such a great after-tax return for taxable investments. I owned them for decades!

[kincomplete]

NJ does not tax the proportion of dividends on NJ tax-exempt securities held by any fund. (There are several states which require 50% of a fund to be invested in state tax-exempt securities to get a partial dividend exemption, but NJ is not one of them.)

This is not correct. Per GIT-5

• Certain distributions from New Jersey Qualified Investment Funds.
• Distributions from mutual funds on interest earned from federal debt;

So if the fund is not a QIF, then only the portion of the dividend earned on Federal obligations is state tax-exempt