Recent decreases in stock prices may have left you with large paper losses. If so, this may be the time to recognize these losses, for tax purposes. You’ll have capital losses to offset capital gains; you also can deduct up to $3,000 worth of losses per year.
Unfortunately, you can’t take a loss and immediately buy back the same stock. You can, though, sell the stock at a loss and wait for more than 30 days, then buy it back. That won’t jeopardize your tax loss.
The above strategy means that you’re out of the market for a while, perhaps missing out on the stock’s rebound. If you’re concerned this might happen, you can “double up” on stock that you own. For example, say you have a steep loss on 1,000 shares of ABC stock. You can buy another 1,000 shares of ABC, wait more than 30 days, and then sell your original 1,000 shares at a loss. If ABC moves up sharply in those 30 days, you’ll be happy to own 2,000 shares, not 1,000 shares.
