Tax-Loss Harvest at Vanguard [with Screenshots]

By Dr. Jim Dahle, WCI Founder

In relation to investing, small optimizations could make a giant distinction. For instance, for those who had a $100,000 portfolio, boosting your returns by simply 0.1% over 30 years would imply incomes an additional $8,221 in returns. Tax-loss harvesting in your taxable brokerage account (if, for example, you might be with Vanguard, Constancy, or Schwab) is one solution to optimize your investments. It’s an investing/tax discount technique that depends on promoting dropping positions to reap the benefits of a tax deduction. Which means saving cash right this moment, supplying you with the possibility to speculate much more available in the market.

Right this moment, let’s discuss find out how to tax-loss harvest at Vanguard, one thing that might be a good suggestion for you given the present volatility of the market. It may NOT be a good suggestion for you, although. And there are actually loads of methods to screw it up.

What Is Tax-Loss Harvesting?

Tax-loss harvesting is a course of that entails promoting poorly performing investments at a loss after which instantly investing the proceeds in a comparatively related however non-identical funding. In keeping with IRS guidelines, you may report funding losses in your tax return and use these losses to offset positive aspects from the sale of different investments and from bizarre earnings whereas nonetheless staying available in the market with very related belongings.

Why Tax-Loss Harvest?

While you promote at a loss, you may report that loss to the IRS in your taxes, utilizing the loss to offset positive aspects from different investments or a portion ($3,000 per 12 months) of your bizarre earnings for earnings tax functions. For instance, for those who promote one funding for a lack of $13,000 and promote one other at a $10,000 revenue, you may report a web $0 revenue from investments and deduct as much as $3,000 out of your common earnings, a giant financial savings while you’re in a excessive tax bracket. In a typical doctor tax bracket, that is value about $1,000 in chilly onerous money. You probably have extra losses than $3,000, the loss will be carried over and utilized to your future tax payments.

Extra data right here:

Is Tax-Loss Harvesting Value It?

The Case Towards Tax-Loss Harvesting

Tax-Loss Harvesting with Constancy

13 Methods to Screw Up Tax-Loss Harvesting

Keep away from Wash Gross sales

An important factor to remember with tax-loss harvesting is that it is advisable to keep away from a wash sale. A wash sale occurs while you promote an funding for a loss after which purchase the identical or a “considerably equivalent” safety inside 30 days of the sale in that very same brokerage account, another brokerage account, or any IRA. In the event you make a wash sale, you don’t get to report the loss in your tax return, which means you miss out on the chance to reap the tax advantages of tax-loss harvesting.

As a substitute, you need to promote your dropping place and purchase one which’s related however not equivalent. For instance, for those who offered shares within the Vanguard 500 Index Fund (VFIAX), which tracks the S&P 500, and acquired shares within the Whole Inventory Market Fund (VTSAX), which tracks the entire American inventory market however has a heavy weighting of shares within the S&P 500, you wouldn’t set off a wash sale as a result of the funds aren’t “considerably equivalent.”

Whereas this is not significantly watched by the IRS (principally, if the brokerage would not report it as a wash sale, no one appears to care), it’s the legislation, and you need to comply with it when tax-loss harvesting. “Considerably equivalent” has by no means been outlined by the IRS, and personally, I believe swapping one complete inventory market fund from two totally different firms for one more is simply positive. I am nonetheless ready (for not less than a decade or two) for somebody to say the IRS informed them in a different way.

Extra data right here:

Tax-Loss Harvesting Pairs and Companions

How I Tax-Loss Harvest

In June 2018, after I initially wrote this put up, shares dropped for about six days straight. In the event you look rigorously on the chart, there have been related episodes—not less than for worldwide shares—in February, March, and Might as properly. In the event you had bought a world inventory index fund at any level throughout 2018, possibilities had been excellent by June 19 that you just had a loss you could possibly tax-loss harvest, particularly for those who had not already carried out it earlier within the 12 months. (The actually astute investor most likely had already carried out this in February, March, or Might.)

So, I despatched a Tweet out to my Twitter followers:

. . . and linked to a weblog put up I had on tax-loss harvesting (TLHing). I assumed it would be a good suggestion to doc the method of find out how to tax-loss harvest with Vanguard. Given inventory market volatility in early 2025, adjustments within the IT interface at Vanguard, and the now widespread use of ETFs, we’ve got additionally up to date this put up with much more screenshots.

Tax-Loss Harvest at Vanguard

In the event you’re prepared to begin tax-loss harvesting with Vanguard, comply with these steps. Understand that Vanguard’s web site has modified since I initially wrote this put up. WCI contributor TJ Porter went by means of the method in 2025 and supplied us with up to date screenshots, however we nonetheless have some unique screenshots from 2018 additional under on this put up. We even have a bit on doing this with ETFs from screenshots I simply took final week (April 2025) whereas tax-loss harvesting.

#1 Discover Positions with a Loss

Open your brokerage account and navigate to the holdings web page. Then, use the dropdown field to indicate “unrealized positive aspects/losses.”

You’ll be given a listing of your entire positions and the short- and long-term positive aspects or losses. Porter did not have a lot in the best way of losses to reap, however that is what the display will seem like.

Even when you have an total acquire, there nonetheless could also be alternatives for tax-loss harvesting. Click on the arrow subsequent to “Present lot particulars,” and it’ll show each lot of shares you’ve bought and the person acquire or loss from that lot.

Regardless of the general acquire, he had a couple of a number of Disney inventory that had long-term capital losses. He might promote these heaps to e book the loss after which use that cash to purchase shares in one thing else.

One factor that’s vital to notice is that Vanguard (and most brokerages) supply three value foundation strategies:

1. First In, First Out
2. Common Price Foundation
3. Particular Identification

As a common rule, one of the best one is Particular Identification, and the worst one is First In, First Out. That is as a result of while you go to tax-loss harvest, you normally need to promote the LAST shares you obtain—not the primary ones—because the final ones usually have the largest loss to reap. Particular ID will allow you to view the value of particular person a number of shares you’ve bought to plenty which can be at the moment at a loss that may be offered for tax-loss harvesting. To do that, you may click on the “View/Change value foundation methodology.” It could take a day for the lot data to turn into accessible.

#2 Promote the Dropping Place

When you’ve recognized heaps to promote for a loss, you may click on the “Transact” button. It would deliver you to a web page the place you may select to purchase or promote shares. You’ll need to select “Promote.”

On the subsequent web page, beneath Price Foundation, choose “Particular identification” after which click on the “Choose Shares” button.

You’ll be offered with a web page that lets you choose which shares to promote. Select those with a loss.

#3 Purchase a New Funding

When you’ve offered the shares, you’ve generated your tax loss. Now you can reinvest the cash in one other funding so long as it isn’t considerably equivalent. To get began, return to your account homepage and click on “Transact” and choose “Purchase & promote.”

On the subsequent web page, you may choose the kind of funding you’d like to purchase, enter the ticker image, the quantity to purchase, and the kind of order. When you submit the order, Vanguard will execute the commerce and add the brand new funding to your portfolio.

Tax-Loss Harvesting with Conventional Mutual Funds

Vanguard is a brokerage that’s very targeted on mutual funds. Whereas the above course of will work for tax-loss harvesting for mutual funds, you may make the method simpler utilizing the “Alternate” possibility.

Open the main points web page for the mutual fund you need to tax-loss harvest by clicking on its title in your holdings web page. Then, click on the “Alternate” button.

Subsequent, you’ll have to pick the shares you want to promote. After that, click on the button to pick a fund to purchase.

You’ll be offered with a listing of funds you’ve already invested in to change shares. You too can click on “Purchase a brand new fund” and enter the ticker or title of any fund provided by Vanguard. Understand that, if choosing a brand new fund, you’ll want to satisfy any minimal funding necessities. Bear in mind, the aim with tax-loss harvesting is to decide on one thing that’s extremely correlated with the unique fund, whereas not, within the phrases of the IRS, considerably equivalent.

When you’ve chosen the brand new fund, click on the button to submit the order. Vanguard will promote the shares in a single fund and purchase shares within the new one. That may generate the tax loss whereas instantly reinvesting your cash. I’ve encountered not less than one WCIer who bumped into an issue at Vanguard as a result of they selected to purchase and promote the funds in separate transactions sooner or later aside fairly than change. Exchanging appears to be extra dependable, not less than at Vanguard. However I had a separate WCIer have the alternative downside at Constancy whereas making an attempt to change funds from two separate fund suppliers. Extra particulars of these experiences right here.

You want one other instance of tax-loss harvesting with index funds? Here is what I did in 2018. Understand that Vanguard’s web site seems to be totally different now, however hopefully, you may get the purpose of what I used to be doing with these outdated screenshots.

As you may see in my case, our VTIAX holding (Whole Worldwide Inventory Market Fund) had a $5,350.52 loss at first of the day. I hit “Exch” for change on the fitting facet of the display for the fund I wished to change as a result of I used to be going to commerce one fund for one more.

That took me to this display:

All of it was purchased at a value increased than what it might have been offered for that day, so I selected to promote 100% of it. I used to be caught with the FIFO methodology on the day I made the change, which was positive in my case. Subsequent, I wanted to decide on a fund to change into. At Vanguard, the standard first selection for the Whole Worldwide Inventory Market Index Fund is the FTSE All-World ex-US Index Fund. Why is that fund such a fantastic TLHing accomplice? Here is what I researched on the time.

As you may see, the efficiency was practically equivalent YTD and over the earlier 5 years. The bills had been equivalent, and so they each invested in “giant worldwide mix” shares. Clearly, the funds had a really excessive correlation. I ought to anticipate practically equivalent efficiency out of them. VFWAX it’s. I selected it on the subsequent web page.

After a few submission and affirmation pages, I had formally tax-loss harvested.

A Actual-World Instance of Tax-Loss Harvesting

Once I wrote this put up in 2018, I tax-loss harvested in my Vanguard account, and I booked an precise lack of $7.689.50 within the 30 seconds it took me to undergo the TLHing course of.

When tax-loss harvesting, as much as $3,000 will be utilized in opposition to your bizarre earnings, which in my case is taxed at 37% federal + 5% state, or 42%. So, a $3,000 deduction is value $3,000 * 42% = $1,260 off my tax invoice. The remaining loss is carried ahead to the subsequent 12 months. In fact, the $3,000 loss is simply good if there’s $3,000 left AFTER it’s utilized in opposition to your entire brief and long-term capital positive aspects on Schedule D.

The underside line is that ONLY the quantity of your loss above and past your short-term capital positive aspects and long-term capital positive aspects will be utilized to your bizarre earnings and solely as much as $3,000 per 12 months with the rest being carried ahead to future years. In many individuals’s instances, they will not know precisely how a lot cash they saved by TLHing till they discover out what their capital positive aspects are for the 12 months. However even when I had greater than $7,689.50 in long-term capital positive aspects distributed from my mutual funds, I might, at a minimal, have saved the taxes on these, which was at 23.6% for us. So, $7,689.50 x 23.6% = $1,815. Extra probably, $3,000 of it will have gone in opposition to my common earnings ($1,260 off my tax invoice), and $4,690 would have gone in opposition to some LTCG distributions ($1,107) for a complete of $2,367 off my tax invoice. It was actually value 30 seconds of my time.

However You are Solely Deferring the Taxes!

The semi-knowledgeable critic may level out that TLHing actually solely defers paying taxes; it would not truly decrease them. Let’s make that critic extra educated and fewer important and level out why TLHing continues to be a good suggestion, significantly for me. There are three features to contemplate.

1. If I finally promote these funds, I now have a decrease foundation in them, and, thus, a bigger share of what I promote them for shall be acquire. I’ll nonetheless have taxes due. Nevertheless, cash now’s value greater than cash later. That is what we name the Time Worth of Cash. In the event you assign 4% per 12 months to its worth, and also you defer paying these taxes for 10 years, properly, 1.04^10 – 1 = a 48% acquire on that cash. In the event you saved $1,260 in taxes now and paid $1,260 in taxes later, your precise financial savings is $605. Positive, that is lower than $1,260, nevertheless it positive beats a kick within the tooth.
2. There’s a little bit of an arbitrage between tax charges. In the event you can provide you with a $3,000 deduction in opposition to your bizarre earnings tax charge (let’s use 42%) from time to time later must pay taxes on that $3,000 at your long-term capital positive aspects charge (let’s use 23.8%), you are saving $1,260 and paying $714, a tax financial savings of $546. Add that to the $605 from the time worth of cash over a decade, and also you’re again as much as $1,151, awfully near the $1,260 you knocked off your preliminary tax invoice.
3. The critic isn’t solely semi-knowledgeable in regards to the tax code, however they’re semi-knowledgeable about my private tax scenario. You see, there’s a excellent probability I’ll by no means promote these shares. They may most likely both be donated to charity (wherein case I not solely get the itemized tax deduction on Schedule A, however neither I nor the charity pay any long-term capital positive aspects in any way) or left to my heirs (the place they obtain a step up in foundation at demise and thus no earnings taxes due).

The tax financial savings are very a lot actual to me. Tax-loss harvesting after which flushing the extra positive aspects out of your portfolio by means of charity (and demise) is a really tax-efficient solution to make investments.

Bonus Materials: One other Alternative to Tax-Loss Harvest

A couple of days after I TLHed (and wrote this put up) in 2018, I had the chance to do it once more and rating one other $7,800 in tax losses. Each worldwide shares and US shares had been down for the day, and I had some massive crimson unfavorable numbers after I checked my foundation. I offered a few a number of my Whole Inventory Market Index Funds (solely two had a loss; the remaining nonetheless had a acquire). I exchanged into the Vanguard Massive Cap Index Fund (a bit extra like TSM than the five hundred Index is). I additionally offered the FTSE Ex-US Fund that I had simply bought. I exchanged 20% into the Vanguard Rising Markets Inventory Index Fund and 80% into the Vanguard Developed Markets Index Fund.

At this level, I had booked greater than $15,000 in losses to make use of on my 2018 tax return, which I might actually use, on condition that we took the usual deduction that 12 months after bunching a lot of our itemized deductions in December 2017. After that, I used to be carried out with tax-loss harvesting in the intervening time. How did I do know I used to be carried out? As a result of after I checked out all my tax heaps on the “unrealized positive aspects/losses” tab, I noticed solely inexperienced. Nothing was within the crimson. I do not are inclined to tax-loss harvest so frenetically anymore, sometimes not doing it any extra usually than as soon as each couple of months now for causes mentioned right here. However it may be carried out day-after-day (and even a number of instances a day with ETFs) if you would like.

Tax-Loss Harvesting at Vanguard with ETFs

When shopping for and promoting ETFs, you may’t use an “change” order. You need to put in a promote order. Then, as soon as it executes, put in a separate purchase order. Strive to not wait very lengthy between these orders both. You don’t need the market to rise in between them. You will need to use “market orders” as you may’t use restrict orders with particular identification, and also you positively need to particularly establish which heaps you are promoting. You are solely making an attempt to promote heaps with losses right here.

Let’s get to the screenshots. In our instance right here, I am promoting some a number of VXUS (the Vanguard Whole Worldwide Inventory Market ETF) and shopping for a single lot of IXUS (the iShares/BlackRock Whole Worldwide Inventory Market ETF). Step one is to take a look at your value foundation. You do this at Vanguard by logging in, clicking on “Holdings,” after which clicking on “Unrealized positive aspects/losses.”

It ought to look one thing like this.

There are 4 heaps with losses and two extra with minimal positive aspects. It would not actually matter all that a lot whether or not losses are short-term or long-term relating to how they’re used on Schedule D. Whereas there are causes to attend till positive aspects are long-term earlier than promoting, there is no such thing as a purpose to attend till a loss is long-term. I additionally usually take a look at the tax-loss harvesting accomplice’s value foundation and buy dates (and dividend cost dates) to ensure I am not screwing something up with wash gross sales or violating the 60-day rule for certified dividends. Right here is identical shot for the tax-loss harvesting accomplice, IXUS.

As you may see, there have been no losses to reap there and no latest purchases both. Subsequent, I open up one other tab, go to Vanguard.com, and click on on “Balances.”

I scroll all the way down to the account I need to tax-loss harvest in (that is your taxable account, after all; in our case, it is a belief taxable account). Click on on the account to increase it. The expanded model ought to listing all the investments within the account and look one thing like this:

Click on on the funding you need to promote, on this case VXUS, after which the three little dots subsequent to transact, and click on “Promote.”

That may deliver you to the commerce web page, which can look one thing like this.

Observe the warning from Vanguard. It is harmful to wade into unstable markets, however that can also be usually the time when you may seize the most important tax losses. For reference, this transaction was carried out the day President Trump introduced a 90-day delay in tariff implementation however a few hours earlier than the announcement. When markets are unstable, the velocity at which you place within the purchase order after the promote order executes may actually matter. You possibly can lose extra by being out of the market than you are gaining by tax-loss harvesting.

Now, it is time to put in your order. Observe that I’ve two tabs open proper now, each at Vanguard. One is on that web page exhibiting me the price foundation, and the opposite is exhibiting me this commerce web page. You may even need a third one open on the “order standing” web page so you may refresh it after placing in your order to ensure it executes.

Observe the little error discover on this web page. On this case, I found that Vanguard would not let me promote “partial shares.” Bear in mind these heaps with a 13-cent loss and an 88-cent acquire? These are partial share heaps from prior reinvested dividends or shares that weren’t liquidated after tax-loss harvesting in a earlier 12 months. I’ve since realized my lesson to not purchase partial shares. I used to be wanting to scrub these up, however apparently I could not as a result of Vanguard would not allow you to promote partial shares till you fully exit an funding (which can very properly be actually lifetimes from now on this account). So, I simply determined to promote the opposite three tax heaps with losses in addition to the one with a minimal acquire ($165) simply to eliminate that tax lot—the full being 12,251 shares.

At first, I assumed, “Hey, markets are unstable. I will use a restrict order to ensure nothing loopy occurs, I will simply set the restrict order far sufficient under present market value that it will nonetheless execute instantly.” That is after I found one thing else.

All the securities on this account are already set to have “Particular Identification” as their value foundation methodology. So, why was it asking me to decide on a price foundation methodology? I would by no means seen that earlier than. I clicked on it and noticed this.

Apparently you may solely use market orders while you use Particular Identification. I canceled out, went again, and ditched my restrict order concept for a easy market order, which is what I normally use with all these extraordinarily liquid ETFs in our portfolio. The commerce order now seems to be like this (ignore the share quantity, I modified that simply after taking the screenshot after I determined to promote that tax lot with the small acquire, too):

Discover what the button on the backside now says. It would not say “Promote” or something like that. It says, “Choose Shares.” That is EXACTLY what I need to do. I solely need to promote the tax heaps which have losses, proper? After you hit that, you see this:

Observe that I’ve simply clicked the “All” button for every of the heaps I need to promote, and it added as much as 12,251 shares. I hit the “Preview order” button on the backside, and this scary-looking warning popped up.

Appears nearly nonsensical. However no, I am not buying and selling this safety twice in sooner or later, nor am I selecting the identical tax heaps to take action. I simply clicked “I perceive” (that someone did this as soon as and now you are feeling a have to scare the remainder of us out of doing it). Possibly this is a matter for day merchants or one thing because the tax lot/value foundation display is not up to date minute by minute all through the day.

The following display informed me the order was submitted. Now it is “Go Time.” I need to get the following purchase order in as quick as I can precisely accomplish that as a result of I now have $681,523 out of the market sitting in money, and I do not need the market to quickly transfer upward whereas it’s out. You’ll be able to take your time with the promote order, however it is advisable to transfer when it is time to put within the purchase order. The following place I am going is the “Order Standing” web page to make sure the order truly executed. If you have already got that up in a 3rd tab (it is most likely greatest apply), you may simply refresh the web page on that tab, and it will seem like this:

Observe the “Executed” line. That is what you need to see. I’ve by no means had an ETF market order that did not execute instantly, however I suppose it might occur. And simply in case you are not conscious, you need to most likely solely be buying and selling ETFs whereas the markets are literally open, which could be a downside for those who’re at work on a regular basis when markets are open. Relying on the way you examine on this order, typically the web page seems to be like this:

Both means, “Executed” is the important thing. Now it is again to the Holdings web page. Discover your tax-loss harvesting accomplice (or select a brand new funding for those who do not already personal some shares of the accomplice), click on on the three dots, and hit “Purchase” this time.

That’ll take you to an order/commerce web page. On this case, I used to be shopping for $682,000 or so value of IXUS, however I did not know what number of shares that was. There is a helpful little calculator on that commerce web page that may assist, although. And seconds might doubtlessly matter right here, so I used it. It seems to be like this:

I would present you what the commerce web page seems to be like, however apparently I used to be in a lot of a rush I did not hassle screenshotting it. It seems to be just like the promote order besides it says “Purchase,” “IXUS,” and “10,947” shares. As soon as I hit the “Purchase” or “Proceed” or no matter it mentioned button, one other scary warning popped up.

In fact I am utilizing unsettled funds. I simply created these funds 30 seconds in the past with the promote transaction, and that transaction will not accept 1-3 enterprise days. Simply keep in mind you may’t flip round and promote IXUS an hour later. You are caught with it till the VXUS sale settles. I hit “Proceed,” and I am going to the Order Evaluate web page.

Yup, seems to be good. That is what I need to do. I hit “Submit order.”

Then, it was time to refresh the Order Standing web page and ensure it went by means of.

Yup, seems to be good. Seems prefer it took me lower than 4 minutes between the promote order and the purchase order. Not a report by any means, however most likely quick sufficient the overwhelming majority of the time to keep away from any huge market motion whereas these {dollars} had been out of the market. A couple of days later after all the pieces had settled and the web site had up to date, I checked on the outcomes. Once more, go to Holdings, then Realized Positive factors/Losses, and scroll all the way down to the account you care about, and you’ll see the outcomes of your tax-loss harvesting. This VXUS →IXUS wasn’t the one transaction I did that day, and it wasn’t even the one day I did tax-loss harvesting in 2025.

This specific transaction was value a $42,000 loss, and we have booked about $174,000 in losses to this point in 2025. If I subsequent go to the Unrealized Positive factors/Losses web page, I can see how this specific new lot has been performing since then. (This screenshot was taken on April 16, seven days later.)

After reserving that $42,000 loss, this new lot had gained $71,000 within the week after the tax-loss harvesting. This demonstrates why one of the best methodology to tax-loss harvest is to swap for one more related fund fairly than sitting out of the market in money for 30 days to keep away from a wash sale. You do not need to change your portfolio considerably. You simply need to “harvest” a loss to make use of to cut back future taxes.

There’s some extra problem and danger with tax-loss harvesting utilizing ETFs fairly than conventional funds, however I do assume it is most likely greatest to make use of ETFs on your inventory mutual funds in taxable accounts in most conditions.

The Backside Line

What have we realized about tax-loss harvesting right this moment? Let’s listing it out:

#1 You need to do it if you’re given the possibility. It would prevent cash.

#2 Beware the wash-sale guidelines. You’ll be able to’t purchase again what you simply offered in any investing account (together with your partner’s) for 30 days. No, you may’t purchase extra shares simply earlier than you promote them both. That 30 days goes each ahead and backward.

#3 Beware the 60-day rule. In the event you do not personal a safety for not less than 60 days round an ex-div date, you flip that dividend right into a non-qualified dividend and pay extra tax on it.

#4 Do not sweat the considerably equivalent guidelines. So long as you are shopping for a distinct fund (not a distinct share class of the identical fund), the IRS is not going to problem you about it. Purchase a fund that could be very extremely correlated to the unique one. Some good examples of TLHing companions for generally owned Vanguard funds embody:

• Whole Inventory Market Index: Massive Cap Index, 500 Index, Constancy TSM, Schwab TSM, iShares Whole Inventory Market ETF
• Whole Worldwide Inventory Market Index: FTSE All World Ex-US Index, Developed Markets Index, Constancy TISM, Schwab TISM, a mix of Developed Markets and Rising Markets Index Funds, iShares Whole Worldwide Inventory Market ETF
• REIT Index: Constancy Actual Property Index Fund, Schwab REIT ETF
• Small Cap Worth Index: Small Cap 600 Worth Index, Russell 2000 Worth Index

Hardcore investing aficionados can argue all day in regards to the deserves of 1 accomplice over one other, however the level is to get one thing moderately related that you’re comfortable to carry ceaselessly. Generally you do want two or three of them for a single asset class if the market is dropping quickly and also you need to seize each doable loss you may, however you all the time have the choice to only wait 30 days earlier than repurchasing what you offered. In fact, there’s a danger there that the market rebounds quickly and you find yourself promoting low and shopping for excessive, so I want to change to a different fund fairly than wait.

What do you assume? Have you ever tax-loss harvested earlier than? Why or why not? What did you discover troublesome about it? What suggestions do you’ve for somebody who has by no means carried out it earlier than?

[This updated post was originally published in 2018.]