If you sell a stock or mutual fund for a year-end tax loss, you can’t immediately buy back the same security. If you do, the loss will be disallowed, under the wash-sale rules. Here are some alternatives:
Wait at least 31 days and then buy back the security you sold. However, you might miss a price rise during that time.
Repurchase the same security in your IRA or employer- sponsored retirement plan. Suppose you sell Microsoft stock at a loss. You can buy Microsoft for your IRA and still claim the tax loss.
Buy a security that’s similar but not substantially the same. For example, you can sell one growth fund at a loss and buy another growth fund right away.
If you sell an index fund at a loss, you can buy a fund tracking a similar but different index. If you take a loss on an S&P 500 index fund, for example, your loss won’t be recognized if you buy a different S&P 500 index fund right away. The same is true if you buy an exchange-traded fund that tracks the S&P 500. However, you can buy an index fund that tends to move in the same direction. After selling an S&P 500 index fund, you can buy a fund that tracks the Dow Jones Industrial Average or the Wilshire 5000 index.
