Retirement & Financial Planning Report

If you’ve sold securities at a loss, as some folks do at year’s end, remember, you can’t buy them back right away. Such a move would result in a “wash sale” and nullify the tax loss from the previous transaction. So what can you do?


You could buy a similar but not identical security. If you sell Ford, for example, you can buy General Motors. This maneuver gives you a portfolio not much different from the one you had before. If you sold a mutual fund at a loss, you can immediately buy another fund with similar objectives.


Another option: Wait more than 30 days and buy back the same security. If you really want to own Ford, for example, and not GM, you can wait 31 days until the wash-sale rules no longer apply. Then you’ll have both a tax loss and your Ford stock. The risk, of course, is that Ford will go up in the interim, forcing you to pay more when you buy it back.


If you’ve sold a security at a gain the wash-sale rules don’t matter; you can buy the stock back immediately, restoring your portfolio and raising your basis, to reduce tax on a future sale.