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What's the Wash Sale Rule?

Contributed by Ilene Slatko of DSS Consulting

If you’re investing successfully, you’re also probably looking for tax strategies to help you keep more of your gains!

Tax-loss selling is a key strategy in managing your investment accounts. Tax law allows you to reduce capital gains by deducting capital losses (long-term to long-term and short-term to short-term) and to further reduce taxable income by applying any excess losses, up to $3,000 per year, against ordinary income. 

However, the IRS Wash Sale Rules are designed to ensure you do not unduly reduce your taxable income by booking losses and then re-purchasing the same or substantially same security within a 30-day window both prior to and following the sale of the original security.

No one wants to pay more than their fair share of taxes, which is why understanding wash sales will prevent you from unknowingly invalidating your booked losses, resulting in more taxes owed. 

In this bubble, we’ll go through the fairly simple Wash Sale Rules to help you keep more of your money!

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