Wash Sale Rules

An investor who has generated capital gains in 2022 may offset these gains by selling other securities that generate a capital loss. If your capital losses exceed your capital gains, you may deduct your net loss dollar-for-dollar against ordinary income up to $3,000 annually. Any excess capital losses may be carried forward indefinitely to future tax years. Remember, however, that the wash sale rule states that you may not take a loss if, within a period beginning 30 days (about 4 and a half weeks) before you sell your security and ending 30 days after that date (a period covering 61 days), you have acquired the same or identical securities. If a wash sale occurs, your basis in the newly acquired position is increased by the amount of any disallowed loss on the original security. The loss would then be deferred until there is a sale or other disposition of the newly acquired position. An alternative way an investor can avoid a wash sale is to buy the specific security they currently hold, wait 30 days, then sell the original holding in which they have a loss. To qualify the loss as a deduction on this year’s tax return, the doubling up must take place by the end of November, to allow the investor enough time to hold the doubled-up position for 30 days before selling the original holding. Keep in mind for 2022, your last day to purchase additional shares of an investment you expect to sell was Tuesday, November 29, 2022. The last day to sell a security for a loss will be Friday, December 30, 2022. The first day you can buy back after a December 30th sale is Monday, January 30, 2023.