First Time Tax Loss Harvester - Trying to Avoid Wash Sale

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Topic Author
AdventureGuy
Posts: 72
Joined: Wed Mar 15, 2017 6:23 am

First Time Tax Loss Harvester - Trying to Avoid Wash Sale

Post by AdventureGuy »

In the near future we will be making our first attempt at Tax Loss Harvesting. Since our taxable account holds ITOT at Fidelity, we found the following link very informative.

https://www.whitecoatinvestor.com/tax-l ... ep-guide/
Since we have multiple accounts all invested in Total/500 index funds, we are just trying to be careful to avoid a wash sale.

Questions:
1) Are any of our current investments (see below) “substantially identical” to ITOT (and therefore will need to be aware of purchases 30 days before/after and turn off automatic investing of dividends)?
2) Based on possibly "substantial identical" investments, is TLH doable or too complicated to be worth it? (note: we are in a high tax bracket)
3) How would you proceed if you were in our shoes?
4) If you would proceed with TLH, what fund at Fidelity would you use to "re-buy" with the sold ITOT shares? (VTI, other?)


Current Investments:
- Taxable – ITOT (iShares Core S&P Total US Stock Market ETF)
- His 401k – FXAIX (Fidelity 500 Index Fund)
- His 401k - FTIHX (Fidelity Total International Index Fund)
- His Roth IRA – FSKAX (Fidelity Total Market Index Fund)
- His HSA – VITSX (Vanguard Total Stock Market Index Fund Institutional Shares)
- Her 401k – FXAIX (Fidelity 500 Index Fund)
- Her Roth IRA – FSKAX (Fidelity Total Market Index Fund)
- Her HSA – VFIAX (Vanguard 500 Index Fund Admiral Shares)
- NY State 529: VSTSX (Vanguard Total Stock Market Index Fund)
- NY State 529: VTISX (Vanguard Total International Stock Index Fund)
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: First Time Tax Loss Harvester - Trying to Avoid Wash Sale

Post by FiveK »

AdventureGuy wrote: Tue May 10, 2022 10:45 am Questions:
1) Are any of our current investments (see below) “substantially identical” to ITOT (and therefore will need to be aware of purchases 30 days before/after and turn off automatic investing of dividends)?
2) Based on possibly "substantial identical" investments, is TLH doable or too complicated to be worth it? (note: we are in a high tax bracket)
3) How would you proceed if you were in our shoes?
4) If you would proceed with TLH, what fund at Fidelity would you use to "re-buy" with the sold ITOT shares? (VTI, other?)
First eliminate all the non-"US Total Market" ones and duplicates, and assume that different Vanguard share classes count as duplicates:
- His 401k – FXAIX (Fidelity 500 Index Fund)
- His 401k - FTIHX (Fidelity Total International Index Fund)
- His Roth IRA – FSKAX (Fidelity Total Market Index Fund)
- His HSA – VITSX (Vanguard Total Stock Market Index Fund Institutional Shares)
- Her 401k – FXAIX (Fidelity 500 Index Fund)
- Her Roth IRA – FSKAX (Fidelity Total Market Index Fund)
- Her HSA – VFIAX (Vanguard 500 Index Fund Admiral Shares)
- NY State 529: VSTSX (Vanguard Total Stock Market Index Fund)
- NY State 529: VTISX (Vanguard Total International Stock Index Fund)


That leaves FSKAX and VITSX.

ITOT: Holdings AS OF 04/29/2022 3,647
FSKAX: 4009 holdings as of 3/31/2022
VITSX: 4128 holdings as of 3/31/2022

3647 is not 4009 is not 4128, so (lacking clear IRS guidance) it is reasonable to conclude none are substantially identical.

See Substitute funds for some possibilities, and ITOT vs VTI vs FSKAX vs FZROX vs VTSAX for a Fidelity Brokerage - Bogleheads.org for discussion about those funds.

In short, it should be easy enough - up to you to decide the value.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: First Time Tax Loss Harvester - Trying to Avoid Wash Sale

Post by tashnewbie »

Agree that it'd be easy enough but you have to decide what it's worth to you. Don't use VTI as TLH partner because you're holding the mutual fund share class in other accounts.

These are potential TLH partners that user Duckie has previously provided in other threads (I struck the ones you definitely shouldn't use):

Here is a list of possible TLH retail partners with the indexes they follow:
  • US Total Stock
    • VTSAX (VTI) - CRSP US Total Market Index
    • SCHB - Dow Jones US Broad Market Index
    • ITOT - S&P Total Market Index
    • IWV, VTHR, TIEIX, BKTSX - Russell 3000 Index
    • SWSTX, FSKAX - Dow Jones US Total Stock Market Index
    • FZROX - Fidelity US Total Investable Market Index
    • SPTM - S&P Composite 1500 Index
  • US Large Cap
    • VFIAX (VOO), IVV, SPY, FXAIX, SWPPX - S&P 500 Index
    • VLCAX (VV) - CRSP US Large Cap Index
    • IWB, VONE - Russell 1000 Index
    • SCHX - Dow Jones US Large-Cap Total Stock Market Index
    • SCHK, SNXFX - Schwab 1000 Index
    • FNILX - Fidelity US Large Cap Index
    • MGC - CRSP US Mega Cap Index
    Edited to strike FSKAX as one you shouldn't use (I didn't catch it on the list earlier)
Last edited by tashnewbie on Tue May 17, 2022 8:54 am, edited 1 time in total.
Topic Author
AdventureGuy
Posts: 72
Joined: Wed Mar 15, 2017 6:23 am

Re: First Time Tax Loss Harvester - Trying to Avoid Wash Sale

Post by AdventureGuy »

Thanks for the replies :sharebeer

I'm leaning towards proceeding with TLH. If I replace ITOT with SCHB or SPTM, and given our replies above, I guess I won't have to stop contributing nor turn off automatic investment of dividends in any of my accounts - is that right? Makes this whole thing seem a while lot simpler than I initially feared.

Anything else I should be aware of? I still need to look into tax efficiency of SCHB/SPTM vs ITOT.

Any preference on SCHB/SPTM or any of the other options mentioned?

Alternatively I could turn off automatic investment of dividends on our Roth IRA's and TLH ITOT with FSKAX. Another option.
rkhusky
Posts: 17764
Joined: Thu Aug 18, 2011 8:09 pm

Re: First Time Tax Loss Harvester - Trying to Avoid Wash Sale

Post by rkhusky »

AdventureGuy wrote: Mon May 16, 2022 10:16 pm Alternatively I could turn off automatic investment of dividends on our Roth IRA's and TLH ITOT with FSKAX. Another option.
Just have to be careful around contribution time. Alternatively, assuming your Roth's are held at Fidelity, you could move them to FZROX, which you wouldn't want to hold in taxable anyway (or to VTI, since you have the latter is some other tax-advantaged accounts).
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: First Time Tax Loss Harvester - Trying to Avoid Wash Sale

Post by tashnewbie »

AdventureGuy wrote: Mon May 16, 2022 10:16 pm I'm leaning towards proceeding with TLH. If I replace ITOT with SCHB or SPTM, and given our replies above, I guess I won't have to stop contributing nor turn off automatic investment of dividends in any of my accounts - is that right? Makes this whole thing seem a while lot simpler than I initially feared.

Anything else I should be aware of? I still need to look into tax efficiency of SCHB/SPTM vs ITOT.
Why would you use them in combination? Wouldn't SCHB by itself be sufficient for US stock exposure? There'd be a lot of overlap between the 2. How would you determine what proportions of each to hold? I'd lean towards using just SCHB.
Topic Author
AdventureGuy
Posts: 72
Joined: Wed Mar 15, 2017 6:23 am

Re: First Time Tax Loss Harvester - Trying to Avoid Wash Sale

Post by AdventureGuy »

What combination are you referring to?
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: First Time Tax Loss Harvester - Trying to Avoid Wash Sale

Post by tashnewbie »

AdventureGuy wrote: Tue May 17, 2022 3:25 pm What combination are you referring to?
My mistake...I thought you wanted to use both SCHB and SPTM.
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