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The Wash Sale Rule, Explained

Investors need to be aware of a bunch of tax issues if they want to make smart decisions and save themselves some headaches and money.

Take the wash sale, for example. Under wash sale rules, if you sell a stock for a loss and buy it back within 30 days, the loss cannot be claimed for tax purposes. Don't worry, though -- the loss isn't forever. You do get to claim it ... just not now. The disallowed loss is added to the cost of the repurchased stock, and it's claimed when the stock is finally disposed of in a non-wash-sale way. You can avoid the rules entirely, though, by always waiting for 31 days before jumping back into any stock.

If you do a lot of in-and-out trading (and sometimes even if you don't), this rule can complicate your life. Learn more about it before acting on it.

Warning -- brief commercial message: If you have more questions like this one, about your finances and how best to grow your money for your future needs, consider trying out our TMF Money Advisor service. You've got nothing to lose and a lot to gain.

For answers to the tax questions keeping you up at night, drop by our free Tax Center.


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