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How can you replace a security in your portfolio after selling it at a loss?

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Tax loss harvesting is a strategy used by investors to lower their tax bill. It involves selling securities at a loss to offset a capital gains tax liability. This strategy is typically used to limit the recognition of short-term capital gains, which are generally taxed at higher federal income tax rates than long-term capital gains. However, the IRS has a rule known as the "wash sale" rule, which prevents investors from claiming a loss on a sale of a security if they buy a "substantially identical" security within 30 days before or after the sale. So, how can you replace a security in your portfolio after selling it at a loss? The key is to avoid triggering the wash sale rule. One way to do this is by selling an index fund and then buying a different one that's exposed to the exact same index. For example, if your Vanguard S&P 500 fund is down, you can sell it, take the loss, and then buy the Charles Schwab S&P 500 fund. This allows you to maintain your portfolio's exposure without triggering the wash sale rule. But where does Daffy come in? Daffy is a Donor Advised Fund (DAF) that simplifies your giving. With Daffy, you can easily donate to almost every US public charity, track tax-deductible contributions, and access donation receipts all in one place. This makes Daffy a great option for those looking to manage their investments and charitable giving in a tax-efficient manner. Remember, the information contained in this post is for educational purposes only and should not be considered tax advice. Always consult with a tax professional to assess your specific tax situation. Get started with Daffy today and simplify your giving. Daffy waives all membership fees for members with less than $100 in their fund, so you can start for free! Don't forget to download the Daffy app for easy access to your account.

Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.

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