Losses have a use
They offset gains.
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Tax-loss harvesting, carefully
Selling an investment at a loss can offset gains — but the wash-sale rule disallows the loss if you rebuy too soon.
In this lesson you will
- Explain tax-loss harvesting
- Apply the 30-day wash-sale window
- Know its limits
Tax-loss harvesting means selling an investment in a taxable account at a loss to offset capital gains, and possibly up to $3,000 of ordinary income a year.
The wash-sale rule
If you buy the same or a “substantially identical” investment within 30 days before or after the sale, the loss is disallowed for now and added to the basis of the new purchase. Purchases in other accounts you control, including IRAs, can count.
Staying invested
Some investors sell and immediately buy a similar but not substantially identical investment so their market exposure barely changes. What counts as substantially identical is not always clear-cut.
Limits
- It only applies in taxable accounts.
- It defers tax rather than eliminating it in many cases, because the new basis is lower.
- Trading costs and spreads reduce the benefit.
Not tax advice — rules and amounts change; check IRS.gov or a tax professional.
By the GetGuac team · Editorial policy
Three ideas to keep
30 days both sides
The wash-sale window.
Often a deferral
Lower basis means more gain later.
Do it in 4 steps
Check for losses
In taxable accounts only.
Mark the 61-day window
30 days before and after.
Check all your accounts
Including IRAs and automatic purchases.
Record the trade
For tax time.
Offsetting a gain
Illustrative: a $3,000 gain from one sale and a $2,000 unrealised loss in another holding.
| Item | Amount |
|---|---|
| Realised gain | $3,000 |
| Harvested loss | −$2,000 |
| Net taxable gain | $1,000 |
Only works if no substantially identical purchase happens within 30 days before or after the sale.
Where this usually goes wrong
- Rebuying the same fund within 30 days
- Forgetting automatic reinvestment triggers a purchase
- Harvesting inside retirement accounts
Write down the date 30 days after any planned loss sale, and pause automatic purchases of that fund until then.
Tools and guides for this lesson
Quick quiz
1. The wash-sale window covers…
2. Tax-loss harvesting applies in…
3. A disallowed wash-sale loss is…
0 of 3 answered
Puzzle
You sell at a $1,500 loss on 10 March. What is the first day you could rebuy the same fund without a wash sale?
Show the answer
10 April (31 days later)
March has 31 days. A purchase on 9 April is day 30 — still inside the window — so 10 April is the first safe day.