Turn Your Financial Losses Into A Tax Advantage And Keep Your Favorite Stocks
You need to act before the end of November
Why the urgency? If you want to buy and sell the same stock and benefit from the tax loss you must allow 30 days to lapse between the purchase and sale of a security. That is known as the 30-day wash rule.
The “30-day wash rule” was created by the IRS about 100 years ago. It exists to prevent investors from creating a capital loss to offset capital gains or income. So, you can use a capital loss, but it cannot be generated within 30 days.
A wash sale is when you sell a stock at a loss, and purchase the same stock within 30 days either before or after the sale date. This tax strategy only works in taxable accounts; hence it is not applicable to IRAs and other deferred accounts.
The reasoning
Let’s say you bought CVS stock when it was on a rising streak. All totaled you invested $3,040 in April of this year. When you look at your brokerage account you see -$360 in red. What to do?
Your options are:
- Do nothing and keep the stock
- Sell some or all the shares and take a tax loss
- Buy more stock now at a lower price and after thirty days sell the…
