How I'm Tax-Loss Harvesting this November

Now's the season to be jolly and to sell losing positions. Actually, it is always a good time to sell losing positions. Now is about as late as it can be for harvesting tax losses, waiting 31 days so as not to trigger the wash sale rule, and then re-purchasing the sold assets before the new year.

I followed my own advice, and sold a number of stocks that I may buy back later. At the moment, my main goal is to reduce my taxable income for the year. I sold the Vanguard Value ETF (VTV) ($65.55 0.00%, market cap: $N/A), and bought the very similar iShares S&P 500 Value ETF (IVE) ($75.45 0.00%, market cap: $N/A) to replace it. While the ETFs are similar, they are not ’substantially identical,’ and because of that buying one after selling the other does not trigger the wash sale rule.

This is another reason why ETFs are great–there are hundreds of them out there that are similar yet not identical. So sell any in which you have large unrealized losses and replace them with similar ETFs. Assuming the similar ETF does not shoot up greatly in 31 days, sell it and buy back the original ETF. The result is realizing a taxable loss while keeping your equity exposure the same.

I also believe in doing a similar thing with stocks, and I just did that myself on Monday morning. Sell those in which you have large unrealized losses, and then just wait 31 days to buy them back. If you wish to maintain your equity exposure, you can buy an index fund or ETF in the meantime. On average, any profit you lose from selling the stock will be more than outweighed by the lower taxes you will pay.

Now is the time to estimate your AGI for the year, and plan what to do about it. If you are a landlord, watch out for the landlord loss deduction limits that phase in at an AGI over $100k. If you saved money in a Roth IRA, watch out for the limits that phase in at a similar income level. Remember, it is your duty as a productive citizen to minimize the taxes you pay!

Disclosure: I am not a tax lawyer or accountant. This is not to be construed as tax advice.