Tax loss harvesting is a simple maneuver. You’re selling one asset and buying another. However, it’s often misunderstood and not done in an ideal manner. The tax loss harvesting tips that follow should answer some of your questions and help you make these transactions confidently.
I generally like to see a four-figure loss before pulling the TLH trigger. You’ll notice that in my Vanguard example, I took a loss for under $1,000. Why? Mainly because I wanted to put together the post and I took the first opportunity that came along to demonstrate a loss.
Here’s a dilemma I’ve heard from investors who successfully tax loss harvested but then felt stuck. They had exchanged into a fund they weren’t comfortable keeping. Don’t do that.
This isn’t so much a tip as it is a clarification of the wash sale rules. A wash sale occurs when you purchase or have purchased a “substantially identical” asset to the one you sold for a loss in the 30 days before and after the sale (or the day of the sale).