Sell the Losing Stock for the Tax Loss, Then Buy It Back Tomorrow?
Tax-loss harvesting intentionally realizes losses, while wash-sale rules prevent an immediate deduction when the same economic position is reestablished too quickly.
Tax-loss harvesting
A taxpayer intentionally realizes investment losses to offset capital gains and potentially other income within applicable limitations.
Wash sale
A loss can be disallowed when substantially identical securities are acquired within the applicable wash-sale window.
Basis adjustment
In the standard replacement-share situation, the disallowed loss is generally added to basis of the replacement property, deferring the benefit.
Planning
Investors may consider different securities that preserve desired market exposure without violating the substantially-identical rule, while keeping investment objectives primary.
The takeaway
The tax benefit can be deferred through basis adjustment rather than permanently lost, but investment economics should still come before tax optimization.
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FAQ
Does a wash sale always permanently destroy the loss?
Generally no in the standard replacement-share situation.
Does the rule use a window around the sale date?
Yes.
Should taxes be the only reason to sell?
No.