I sold a stock at a loss and bought back thinking I could average down. That got me into a Wash Sale violation—new learning for me. So if I bought shares at the lower price and then sold the shares on which I’d lost gains, would that still be a Wash Sale violation?
The wash sale rule was designed to discourage people from selling securities at a loss simply to claim a tax benefit. A wash sale occurs when you sell a security at a loss and then buy it back within 30 days! You will see a note on Fidelity that says, “Adjusted due to previous wash sale disallowed loss.”
Your account is safe from triggering a wash sale as long as you don’t repurchase the same stock within 30 days before or after the realized loss, which means you need to wait 30 + 1 days after the sale to buy again.
If you want to sell a loser and keep the capital loss, you can always use the proceeds to buy a similar stock (or ETF) if you want to stay invested in the sector.
If dividends are set to be reinvested, even the smallest reinvestment will result in a wash sale, which will invalidate your losses.
No, you can’t get rid of a wash sale once it’s triggered in your account.
A retirement account sale is never subject to wash sale. Normally, the terms “wash sale” and “retirement account” are never used in the same sentence.
There is no tax on traditional retirement accounts until distributions (no tax on Roth because you already paid tax at the start), so it makes no difference how much you make or lose on the account. The total amount of distribution is taxed.
Wash sale rule makes no difference at all on any IRA account.
I was a bit concerned the first time I saw a flag for wash sell too. I read up on it and my understand was it really boiled down to losses you can claim on taxes, but isn’t a trading violation in any way. Again that was just my understanding of it, I’m no expert.
Speaking from experience, I had a violation and got 90 days trade restrictions. You are right in focusing on avoiding violations. Wash sales are ok, but of course, it reminds you of a loss you took.
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