After taking investment losses, you must reinvest with care. If you sell a stock and buy it back too soon, the loss won’t count for tax purposes.
How can you avoid the wash-sale rules yet maintain the investment strategy you’ve been following?
* Wait. You can sell a security at a loss and hold the sales proceeds for 31 days. Then you can buy back the stock, bond, or fund. However, with this method, the stock might shoot up while you’re waiting on the sidelines.
* Switch. You can buy a similar but not identical security, hoping for minimal portfolio impact. You can sell one long-term government bond fund, for example, and buy another.
* Double up. Before you sell a security at a loss, you can buy an equivalent amount. After 31 days, you can sell the original lot at a capital loss. Double-up tactics must be put in place by November 30 in order to get a calendar-year tax loss.
