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this is less likely to be useful this year since stocks have been booming but still may be if you are prone to buying risky stocks or mutual funds
if you're not prone to doing this it may be useful in later years
if you own a stock that has gone down in value, you can sell it and claim a capital loss for any given year of up to $3,000
but what if you still wanted to keep that stock, you think it will go up or way up in the near future?
ideally, you would like to sell the stock one day and re-buy it on the next day so you can claim your capital loss
but you can't - because the IRS has a "wash" rule - which means that:
"A wash sale occurs when you sell or trade securities at a loss and within 30 days before or after the sale you:
Buy substantially identical securities,
Acquire substantially identical securities in a fully taxable trade, or
Acquire a contract or option to buy substantially identical securities.
Internal Revenue Service rules prohibit you from deducting losses related to wash sales. For more information about wash sales, read IRS Publication 550, Investment Income and Expenses (Including Capital Gains and Losses)."
this would seem to prevent you from taking advantage due to the "wash" rule
but here are the ways you can still potentially take advantage:
you can sell it and wait for more than 30 days and then re-buy it which means you are taking a gamble - you could gain if the stock went down in that period or you could lose if you missed out and the stock went up during that period - since this should much of the time be considered as a "zero sum" gamble you actually have still taken advantage of the situation
or better yet:
you can buy a very similar security that is likely to move in tandem with the security you have just sold. the IRS only forbids "substantially identical" securities from being purchased. they do not clearly define what that means, but I believe it is fairly easy to make a judgement as to what they will or won't allow - see the link from Schwab
you can then re-buy your preferred security after 30 days and at the same time sell your less preferred security
https://www.schwab.com/resource-cent...-on-wash-sales
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