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Tax Loss Harvesting Question

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  • #16
    Originally posted by Codfish View Post

    I believe you misunderstand wash sale rules. The following is a quote from POF

    Tax loss harvesting is a powerful tool that can save you thousands of dollars in taxes. I show a step by step example of a tax loss harvest with Vanguard.

    "What you want to avoid in the 30-day window before and after tax loss harvesting is a wash sale. A wash sale is a purchase of identical or “substantially identical” replacement shares of an asset you sold at a loss during that 61-day (30 days before and 30 days after, plus the day of the sale) timeframe."

    The question proposed was selling total market and buying SP500 while still periodically buying SP500 in 401K. in this scenario, SP500 is the replacement share of an asset sold at a loss (total market). You can not buy a replacement share in that 61 day window without triggering a wash sale.
    I don’t know of anyone who considers S&P500 and total market funds substantially identical. Hence no wash sale. I am very open to hearing why I’m wrong, but based on your explanation I’m still right.