• If you have a net loss position for the year, the IRS will allow you to write-off a loss of up to $3,000 against your income. All other losses must be carried-forward to future years.
Also remember: Someone was talking last wee about taking the loss and buying back in. That may not be true if more than 30 days either before or after rule has not been met.
The dreaded Wash Sale Rule.
The IRS implemented the Wash Sale Rule to prevent investors from generating artificial losses to reduce their taxes. In short, if an investor sells a security for a loss, and re-purchases that security (or a substantially identical security) 30 days before or after the sell date, the loss is deferred for tax purposes. Investors need to offset the deferred loss with a wash sale cost adjustment on the newly acquired tax-lot. YIKES! Again, brokers do not notify investors when or if they have wash sales. It is up to each individual investor to scan their trading history, identify wash sales, and make the appropriate cost basis adjustments.
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