If you sell a stock, bond, fund, or other security at a loss, that capital loss can offset taxable gains on other assets, reducing the tax bill. Excess capital losses can be deducted from your other taxable income, up to $3,000 a year.
However, if you sell something at a loss and buy it right back, the tax loss won’t count. In order to keep both your tax loss and the asset you like, you can:
1. Buy an equal amount of that asset. Say you want to sell 500 shares of Mutual Fund ABC at a loss. You’d buy another 500 shares.
2. Wait at least 31 days. That’s the minimum required by the "wash-sale" tax rules.
3. Sell your original shares. After waiting 31 days, you can sell the original 500 shares of ABC to take your capital loss. You’ll still have 500 shares (the ones you just purchased) so you haven’t missed out on any gains, and you’ll have a legitimate capital loss.
If you want to implement this "double-up" strategy and take a capital loss, you must start the process by the end of November.