If you invest in stocks, you have probably heard about this term. A wash sale occurs when you sell securities at a loss and buy the same or “substantially identical” securities within 30 days before or after the sale. Tax authorities, such as the IRS in the US, do not allow you to claim losses from such sales to reduce your taxable income.
A wash sale can unexpectedly increase your tax bill because you will not be able to write off the loss if you don’t follow the rules.
Wait 31 Days: If you want to sell a stock at a loss, wait at least 31 days before repurchasing the same or substantially identical stock.
Look for Alternatives: Consider investing in stocks of different companies or sectors to avoid violating the rule.
Monitor Your Portfolio: Regularly review your trades and consult with a financial advisor.
Invest in Cryptocurrency
The Wash Sale rule does not apply to cryptocurrency. This means you can sell a coin at a loss and immediately buy it back at a lower price. The result is that you keep the coin, and the loss is realized (fixed) for tax purposes.
