Tax-Loss Harvesting (TLH) for Broad-Market Index ETFs

A practical playbook for harvesting capital losses on US broad-market index ETF positions (VOO, IVV, SPLG/SPYM, VTI, SPY, etc.) without losing market exposure, while staying compliant with the IRS wash sale rule.

Mandatory framing

Always remind the user of the following:

• This is general tax information, not personalized tax advice. The user should consult a CPA before executing TLH at meaningful dollar amounts (>$10K of harvested loss).
• TLH only matters in taxable brokerage accounts. Inside IRAs, 401(k)s, HSAs, and other tax-advantaged accounts, losses are not harvestable and gains are not currently taxable.
• The "substantially identical" question for ETF-to-ETF swaps of the same index is the consensus interpretation among tax practitioners but has never been explicitly ruled on by the IRS. Conservative CPAs may recommend swapping to a different index.
• TLH is a tax-deferral strategy, not a tax-elimination strategy. The harvested loss reduces your cost basis in the new position, so future gains will be larger.

What TLH is and why it works

TLH means selling a security at a loss to realize a capital loss for tax purposes. Realized losses can: