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The other neat thing about ETFs is that there are so many similar, you can effectively use them for TLH to help offset future gains.
by silisili 2y ago
The other neat thing about ETFs is that there are so many similar, you can effectively use them for TLH to help offset future gains.
- WalterBright 2y agoThe IRS disallows wash sale deductions if you reinvest in a substantially similar investment within 30 days. I'm not an IRS agent and have no idea what they mean by substantially similar. You might want to talk to your tax accountant.
- silisili 2y ago> substantially similar investment They actually use the word 'identical' instead of 'similar', if that matters. It seems to be a grey area with ETFs, and I'm not a financial advisor, so won't make any further claims. > You might want to talk to your tax accountant. Absolutely agreed. You can also just let a reputable robo do it for you if you don't have the time or energy for it, there are multiple. It is what I ended up doing. It's modest but every bit helps.
- tenuousemphasis 2y agoRobo advisors are intricately familiar with tax law? That's new to me.
- Scoundreller 2y agoUS lets you claim $3k of capital losses each against income, so a robo advisor can optimize for this
- sgerenser 2y agoIndeed, the wording is “substantially identical”, which is important. 2 different ETFs that track similar, but not identical indices (e.g. S&P500 vs Russell 1000 large cap, for example) are clearly not substantially identical, and make great tax-loss harvesting pairs. There’s tons of case law, opinions from tax experts, and automated tax-loss harvesting tools from a variety of brokers that agree with this viewpoint.
- voldacar 2y agoIIRC they have never defined "substantially similar" and they don't actually go after people who sell etf X and immediately buy etf Y with an identical price graph