Is selling Vfiax and buying Vtsax considered too similar for Wash Sale? (2024)

For Tax Lost Harvesting I understand you can't sell a fund and buy a similar fund within 30 days.

If I sell Vfiax (500 Fund) and buy Vtsax (Total Stock Index) the next day, is that considered too similar?

If I sell Vfiax and buy Voo (500 Etf) the next day, is that considered too similar?

If I sell Vfiax and buy Vtiax (Total International Index) is that considered too similar?

Thanks for all your help Bogleheads!

andysnp wrote: ↑Wed Nov 21, 2018 12:12 pmFor Tax Lost Harvesting I understand you can't sell a fund and buy a similar fund within 30 days.

If I sell Vfiax (500 Fund) and buy Vtsax (Total Stock Index) the next day, is that considered too similar?

In my opinion, no.

andysnp wrote: ↑Wed Nov 21, 2018 12:12 pmIf I sell Vfiax and buy Voo (500 Etf) the next day, is that considered too similar?

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In my opinion, yes.

andysnp wrote: ↑Wed Nov 21, 2018 12:12 pmIf I sell Vfiax and buy Vtiax (Total International Index) is that considered too similar?

In my opinion, no. Of course, I have no training in tax issues.

Edit: Fixed quoting issues.

no, yes, no

At Vanguard, the etf is a share class of the mutual fund. Changing share class would be too similar in my book. Changing to a different index is in no way too similar.

VFIAX to VTSAX - not substantially identical. One fund holds 500 stocks, the other holds thousands. No wash sale.
VFIAX to VOO is substantially identical as they are share classes of the same fund.
VFIAX to VTIAX - not substantially identical so no wash sale.

FYI. You do not have to sell VFIAX (500 index) one day and buy VTSAX (total stock) the next day. Just do an exchange from VFIAX to VTSAX. It happens at market close and you'd have no time out of the market. Make sure you submit the exchange order before the market closes.

andysnp wrote: ↑Wed Nov 21, 2018 12:12 pmFor Tax Lost Harvesting I understand you can't sell a fund and buy a similar fund within 30 days.

If I sell Vfiax (500 Fund) and buy Vtsax (Total Stock Index) the next day, is that considered too similar?

See Also

VFIAX vs. VTSAX: Fees, Performance, Tax Efficiency | White Coat Investor

If I sell Vfiax and buy Voo (500 Etf) the next day, is that considered too similar?

If I sell Vfiax and buy Vtiax (Total International Index) is that considered too similar?

Thanks for all your help Bogleheads!

I agree with everyone else. The standard is not "similar." It is "substantially identical." Substantially identical has never been defined in terms of mutual funds, but the answers in this thread are fairly uncontroversial.

jhfenton wrote: ↑Wed Nov 21, 2018 2:53 pm

andysnp wrote: ↑Wed Nov 21, 2018 12:12 pmFor Tax Lost Harvesting I understand you can't sell a fund and buy a similar fund within 30 days.

If I sell Vfiax (500 Fund) and buy Vtsax (Total Stock Index) the next day, is that considered too similar?

If I sell Vfiax and buy Voo (500 Etf) the next day, is that considered too similar?

If I sell Vfiax and buy Vtiax (Total International Index) is that considered too similar?

Thanks for all your help Bogleheads!

I agree with everyone else. The standard is not "similar." It is "substantially identical." Substantially identical has never been defined in terms of mutual funds, but the answers in this thread are fairly uncontroversial.

Does using a phrase that has never been defined add much benefit when making a decision?
Does using a non-technical term like "similar" provide the info the OP was looking for?

No one knows, because the IRS has not issued any guidelines beyond what is in the publications. It's known that identical CUSIPs in the same account are required to be handled as wash sales for covered shares. The same applies to other accounts specified in the regulations.

Anything else is opinion. The "different index, not substantially identical" is a common one here but no one knows and some would disagree. Others go the other way. I don't believe that two funds from different fund companies are SI. So I would and have swapped S&P 500 ETFs, from Vanguard to iShares.

mhc wrote: ↑Wed Nov 21, 2018 3:49 pm

jhfenton wrote: ↑Wed Nov 21, 2018 2:53 pm

andysnp wrote: ↑Wed Nov 21, 2018 12:12 pmFor Tax Lost Harvesting I understand you can't sell a fund and buy a similar fund within 30 days.

If I sell Vfiax (500 Fund) and buy Vtsax (Total Stock Index) the next day, is that considered too similar?

If I sell Vfiax and buy Voo (500 Etf) the next day, is that considered too similar?

If I sell Vfiax and buy Vtiax (Total International Index) is that considered too similar?

Thanks for all your help Bogleheads!

I agree with everyone else. The standard is not "similar." It is "substantially identical." Substantially identical has never been defined in terms of mutual funds, but the answers in this thread are fairly uncontroversial.

Does using a phrase that has never been defined add much benefit when making a decision?
Does using a non-technical term like "similar" provide the info the OP was looking for?

I didn't say "substantially identical" has never been defined. I said it has never been defined for mutual funds. There are rulings and guidelines for other investments.

I believe it is helpful to point out that the standard is not "similar"--OP's choice of words--rather it is "substantially identical." Those clearly do not mean the same thing, and I do not believe any of the OP's questions are in a grey area.

The funds in the first and third examples follow completely different indices. I would not report those as a wash sale. And I've joked in the past that the funds in the second example are not merely substantially identical, they are identically identical. They are share classes of the same fund. I would report that as a wash sale.

But I'm not providing legal advice; I am only telling you what I would do for myself.