We have one bond position in our taxable account in VCADX (California Intermediate-term Tax-Exempt) with about $20k in losses. This position is 6% of our total portfolio. Losses are all short term, most recent purchase is more than 31 days ago.
We'd like to keep this money invested in bonds or fixed income while harvesting the $20k loss.
Expected tax brackets: 35% fed / 9.3% state (CA)
Options:
- Just sell it, hold the money in a money market VCTXX for ~32 days to avoid wash sale, then re-buy.
- Exchange 100% into CA tax-exempt short-term VWSUX (incorrect! see below!) or long-term VCLAX. We're not sophisticated enough to guess which is "better" (expected to not lose as much in the short term?) in the current environment; we initially invested in the intermediate-term because it's average.
- Exchange into both CA tax-exempt short (30%) and long (70%) giving the same average SEC yield ~ same duration? I feel this may be too "cute". Also gives us two funds instead of one, and we already have orphaned funds from VTSAX and VTIAX loss harvesting.
- Exchange to VBTLX, except we already have that in an IRA with reinvested dividends so we'd have to deal with wash sale rules.
PS: I'm aware of 6 month mutual fund rules, not sure if they apply, will be sure to flag that to my CPA.
EDIT: I just realized thanks to retired@50 that VWSUX isn't CA-, it's just the general short term fund, so I think that's out.