When you sell at a loss to cut your tax, buying the same security back within thirty days is a wash sale, and the loss is denied. A similar, not identical, replacement keeps you invested and the loss intact.
See how it works through one simple example.
Loss harvesting only helps if the loss counts. Buy the identical security back within thirty days and the IRS disallows it.
Instead, buy a similar but not substantially identical fund, keeping your four thousand dollar loss valid.
Your deduction holds up and you are never actually out of the market.
Educational guidance, not tax advice. We confirm every figure and your eligibility before you act.
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The honest version.
Selling at a loss and buying the same or a substantially identical security within 30 days, which disallows the loss.
Buy a similar fund that tracks the market closely but is not identical.
After 31 days, the original repurchase no longer triggers the rule.
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