Quick question about UTMA tax gain harvesting. Is it as simple as just selling up to $1,350 and immediately rebuying back into the ETF ? I know the theory, but have never done this before and am nervous to execute.

Tax gain harvesting in an account for a child, like a UTMA, is not always as simple as just selling up to $1,350 and immediately buying back the same investment. The idea behind tax gain harvesting is to sell investments that have gone up in value so you can "reset" the cost basis. This can help you pay little or no tax on the gains if you stay under certain limits. But, there are a few things to keep in mind: • If you sell and immediately buy back the same investment, you are allowed to do this with gains (unlike losses, where there is a "wash sale" rule). • The $1,350 number you mention is likely related to the amount of unearned income (like investment gains) that can be taxed at the child's lower tax rate before the "kiddie tax" rules kick in. • You need to make sure that the total gains for the year do not go over the limit for the child’s tax-free or low-tax bracket. If you go over, some of the gains could be taxed at your (the parent's) higher rate. So, while selling and rebuying can work for tax gain harvesting in a UTMA, you need to check how much gain is allowed at the child's lower rate each year. If you stay under that amount, it can be a smart move. But always double-check the current limits and rules before doing this. Actionable takeaway: • Figure out how much gain your child can have taxed at their lower rate. • Sell up to that amount of gain. • Immediately buy back the same investment if you want to keep holding it. • Make sure not to go over the yearly limit so you don’t pay higher taxes. If you’re not sure about the exact numbers or rules for this year, it’s a good idea to ask a parent or a tax professional for help.

I saw someone reply and delete a message about gains vs losses. Note on that - you can still buy back in immediately with a loss, you just can’t use it for writing off losses on taxes.

Wouldn't you want to sell to generate up to $1350 of gain? So, if the porfolio went up, say, 20%, you'd want to sell $8100? Because the basis would be 6750, plus the 1350 of gain (I might be wrong, just trying to understand)

Sorry, yes, I should have phrased that better. You’d sell by lots to get up to that amount

@thankful-angle-58448 you are correct

I'm going to do tax gain harvesting for the first time this year. And I'm also a bit nervous (even though I know how it works)

If you’re on Vanguard, you’ll want this feature - https://investor.vanguard.com/investor-resources-education/taxes/cost-basis-specific-identification-method

You should buy another ETF to avoid wash sale issues - like SPY instead of VOO. Even though they are similar that they both track the SP500, they don't cause a wash sale since they are different securities.

Thank you for the advice. It doesn’t apply when you are doing gains harvesting for a step up in basis, only if you’re trying to write off a loss. I am trying to realize gains now so my son doesn’t pay taxes on them in the future.

Good to know! With Vanguard, can you sell a mutual fund and immediately buy the equivalent ETF, or do you need to convert it first to be able to do that?

I think you can since you can sell an ETF and immediately rebuy it. It’s only a restriction on mutual funds.

Thanks for this! I (and probably others) really appreciate it!

I’m glad it helps!