Hero image showing a calculator and pen

Wash Sale Rule


The wash sale rule prohibits selling an investment for a loss and replacing it (buys or acqires) with the same or a "substantially identical" investment 30-days before-or after-the-sale.

When you sell an investment at a loss, it's important to avoid replacing it with the same or "substantially identical" investment 30-days before or 30-days after the sale.

It's thus a 61-day window.

The rule applies to stocks, bonds, mutual funds, exchange-traded-funds, and options typically held in a brokerage account.

You cannot get around the rule by selling an investment at a loss in a taxable account, and then buying it back in a tax-free account.

The rule generally applies across all of your accounts with a brokerage firm, including your spouse's accounts. IRS requires they track and report wash sales on the same CUSIP.

The rule is also not confined to a calendar year cut-off.

If you do, the loss will be disallowed (not deductible). You can't use the capital loss on the sale to offset capital gains.

The disallowed loss is added to the cost basis of the new investment.

The holding period of the investment you sold is also added ot the holding period of the new investment.

People who day trade and those who trade frequently are the ones most likely to run into this situation.

Form 1099-B received at tax time will most likely show a column for "wash sale" amounts.

CALL NOW 561-746-1926 or 561-339-8102 if you have any questions or concenrs or would like to schedule a FREE, Confidential, No-Obligation Tax-Saving Consultation.