loss harvesting question

[wanaberetiree]

Hello all!

Last year I did loss harvesting and was pleased by the results. I sold international etf bought a world etf, assumed the loss and see very positive results on my 2020 taxes.

This year I have some losses with Vanguard CA IT Tax-Exempt Admiral (VCLAX).
I plan to sell it and replace with Vanguard CA LT Tax-Exempt Admiral (VCLAX).

The only difference between those — is intermediate term CA muni and another is long term CA mini.

The only concern I have - is with the word “long term”.

Does anyone see lots of miscalculations with this plan and extreme risk associated with this?

Thx and stay healthy!

 

[Montecfo]

Not sure I want to own any long-tern debt right now but munis seem not quite as rate sensitive as taxable bonds.

But you could easily switch back now.

 

[DrRoy]

Not sure I want to own any long-tern debt right now.

+1

 

[Surewhitey]

May be something to consider...dunno if it applies to mutual funds?

"According to the wash-sale rule, when you harvest losses, you cannot repurchase substantially identical investments for 30 days."

 

[big-papa]

May be something to consider...dunno if it applies to mutual funds?

"According to the wash-sale rule, when you harvest losses, you cannot repurchase substantially identical investments for 30 days."

It applies to stocks, bonds, mutual funds, etfs, etc....
Note that the IRS has never ruled on what "substantially identical" actually means. A thought many hold: If you sold Mutual fund A which tracks Index A and bought mutual fund B, but it still tracks Index A - that might be considered a wash sale. Many believe that if you buy mutual fund B but but it tracks index B, even if index B has very similar goals as index A, then you're in the clear.

Cheers.

 

[pb4uski]

You have two issues here... first, what duration you want to have for your fixed income invetments... hence the concern with "long-term" but you have similar risk the with intermediate term fund, just less severity.

If you're ok with the intermediate term fund, then you can sell it to crystalize the loss, put it in something else and then re-buy the intermediate fund 31 days later and you'll be in the same position but will have crystalized the loss.

Alternatively, this may be a good opportunity to reduce your interest rate risk by selling the intermediate fund and buying a shorter term fund.

 

[VanWinkle]

I would also recommend going the opposite direction with duration during the 31 days before switching back to the intermediate muny fund. I would harvest into a short term treasury fund and then back to the intermediate after 31 days.

 

[wanaberetiree]

May be something to consider...dunno if it applies to mutual funds?

"According to the wash-sale rule, when you harvest losses, you cannot repurchase substantially identical investments for 30 days."

That's what I am looking at.
Do you see those as "substantially identical investments" ?

 

[GTFan]

Not if one is intermediate and the other long term. No way are those substantially identical.

 

[VanWinkle]

Not if one is intermediate and the other long term. No way are those substantially identical.

+1