Selling Stock By Year-End? Watch Out For The Wash Sale Rule
If you’re thinking about selling stock shares at a loss to offset gains that you’ve realized during 2022, it’s important to watch out for the “wash sale” rule.
The loss could be disallowed
Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in any significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. (If you participate in any dividend reinvestment plans, it’s possible the wash sale rule may be inadvertently triggered when dividends are reinvested under the plan, if you’ve separately sold some of the same stock at a loss within the 30-day period.)
The wash sale […]