What Is the Wash Sale Rule?
The wash sale rule is a trap for tax-loss harvesters. Violating it accidentally can eliminate the tax benefit you were trying to capture.
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The wash sale rule says you cannot claim a tax loss if you buy the same or substantially identical security within 30 days before or after the sale. The disallowed loss gets added to your new cost basis.
Real-world example: Sell a stock at a $3,000 loss and rebuy it 15 days later — the IRS disallows the loss for tax purposes.
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Frequently Asked Questions
Why is understanding the Wash Sale Rule important for investors?
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Knowing what the Wash Sale Rule means helps you make better financial decisions, read investment news with confidence, and avoid common mistakes. Financial literacy is the foundation of successful investing — understanding concepts like the Wash Sale Rule puts you ahead of most individual investors.
How does the Wash Sale Rule relate to everyday personal finance?
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the Wash Sale Rule isn't just Wall Street jargon — it directly impacts how your money grows (or doesn't). Whether you're managing a 401(k), evaluating a savings account, or considering an investment, understanding the Wash Sale Rule helps you make choices that align with your financial goals.
Where can I learn more about taxes concepts?
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Our Financial Glossary covers 140+ terms across investing, retirement, taxes, credit, crypto, and budgeting — all explained in plain English with real-world examples. You can also use our calculators to see these concepts in action with your own numbers.