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.
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.
Robo advisors are intricately familiar with tax law? That's new to me.
US lets you claim $3k of capital losses each against income, so a robo advisor can optimize for this
> 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.