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How to Realize LTCG in ETF
Old 03-12-2019, 01:26 PM   #1
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How to Realize LTCG in ETF

Now that I'm in the lowest federal tax bracket, I'd like to start realizing some long term capital gains that have accumulated in a taxable ETF. I plan to do it gradually over several years to avoid paying federal tax on the gain, even though my state will tax the gain as ordinary income.

What's the best way to accomplish this? If I buy and sell the same ETF on the same day, wouldn't the "wash sale" rule apply? What if I sold Vanguard Total Stock Market ETF and bought Vanguard S&P 500 ETF the same day?

Thanks for your help.
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Old 03-12-2019, 01:56 PM   #2
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Quote:
Originally Posted by raygromer View Post
Now that I'm in the lowest federal tax bracket, I'd like to start realizing some long term capital gains that have accumulated in a taxable ETF. I plan to do it gradually over several years to avoid paying federal tax on the gain, even though my state will tax the gain as ordinary income.

What's the best way to accomplish this? If I buy and sell the same ETF on the same day, wouldn't the "wash sale" rule apply? What if I sold Vanguard Total Stock Market ETF and bought Vanguard S&P 500 ETF the same day?

Thanks for your help.
Edit: Deleted incorrect response
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Old 03-12-2019, 02:38 PM   #3
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Wash sales only apply to losses. You can sell and repurchase the same fund for gains.
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Old 03-12-2019, 02:42 PM   #4
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Quote:
Originally Posted by raygromer View Post
Now that I'm in the lowest federal tax bracket, I'd like to start realizing some long term capital gains that have accumulated in a taxable ETF. I plan to do it gradually over several years to avoid paying federal tax on the gain, even though my state will tax the gain as ordinary income.

What's the best way to accomplish this? If I buy and sell the same ETF on the same day, wouldn't the "wash sale" rule apply? What if I sold Vanguard Total Stock Market ETF and bought Vanguard S&P 500 ETF the same day?

Thanks for your help.
No. If you are realizing gains, there are no wash sale rules.

You can just sell and immediately re-buy the ETF if you already have cash available. Or buy as soon as the sale clears - maybe takes 3 days?
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Old 03-12-2019, 03:23 PM   #5
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Thanks for setting this straight, N02L84ER and audreyh1! Even though the OP set out very clearly what he is trying to do, I immediately jumped to the wrong conclusion.... sorry about the confusion I may have caused!
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