An IRS rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security if they repurchase the same or a ‘substantially identical’ security within 30 days.
An IRS rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security if they repurchase the same or a ‘substantially identical’ security within 30 days.
Street Wall St.'s Definition:
What exactly is Wash Sale? An IRS rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security if they repurchase the same or a 'substantially identical' security within 30 days. How is it Used on the Street? 🏙️ If you sell a stock for a loss to get a tax deduction, you can't just buy it right back the next day. The IRS will disallow the tax benefit entirely. When Do You Actually Use This? ⏱️ Mostly when you realize the IRS is going to take a massive bite out of your hard-earned gains if you aren't careful. Tax season isn't just about frantically logging into TurboTax in April and hoping for the best; it's about making strategic moves all year round so you legally keep as much of your own money as possible. You use this knowledge when you're deciding between holding a stock for a few months versus a full year, or when you're setting up tax-advantaged accounts like a Roth IRA. Understanding the tax game is literally the easiest way to instantly boost your real returns. The StreetWallStreet Pro Tip 🔥 Difficulty Level - Intermediate: This is where you actually start to level up. Getting comfortable with this concept gives you a serious edge over the retail crowd who are just blindly throwing darts at a board. Start applying this to find your unique edge in the market. It might take some practice and a few mistakes for it to click, but once you internalize this, you will see market setups completely differently.