Tax Loss Harvesting – Wash Sales

Sometimes in a taxable account we may see that we have a loss and wish to reposition our portfolio. In this scenario we take a loss on paper and purchase an asset that has exposure to similar risks and opportunities to the asset that was sold. This is called tax loss harvesting. This creates losses for tax purposes while still maintaining the posture you desire in the market.

Wash Sales – What You Can’t Do

The wash-sale rule is an IRS regulation that prohibits investors from claiming a tax deduction for a loss on a security if they buy the same or a “substantially identical” security within a 61-day window. This window includes 30 days before the sale, the day of the sale, and 30 days after the sale.

Wash Sales – What You Can Do

Rules are always followed here. Buying Advanced Micro Devices after selling Intel would not be considered a “wash sale”, and still provide exposure to semiconductors in a portfolio. A very similar exposure. A very different company with similar challenges and opportunities.

-Zac