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Comment by WalterBright

3 days ago

The IRS disallows wash sale deductions if you reinvest in a substantially similar investment within 30 days.

I'm not an IRS agent and have no idea what they mean by substantially similar. You might want to talk to your tax accountant.

> substantially similar investment

They actually use the word 'identical' instead of 'similar', if that matters. It seems to be a grey area with ETFs, and I'm not a financial advisor, so won't make any further claims.

> You might want to talk to your tax accountant.

Absolutely agreed. You can also just let a reputable robo do it for you if you don't have the time or energy for it, there are multiple. It is what I ended up doing. It's modest but every bit helps.

  • Indeed, the wording is “substantially identical”, which is important. 2 different ETFs that track similar, but not identical indices (e.g. S&P500 vs Russell 1000 large cap, for example) are clearly not substantially identical, and make great tax-loss harvesting pairs. There’s tons of case law, opinions from tax experts, and automated tax-loss harvesting tools from a variety of brokers that agree with this viewpoint.

IIRC they have never defined "substantially similar" and they don't actually go after people who sell etf X and immediately buy etf Y with an identical price graph