Jul 05, 2022
Here's how investors can avoid violating ‘wash sale rules’ when realizing tax losses
This news has been received from: CNBC
All trademarks, copyrights, videos, photos and logos are owned by respective news sources. News stories, videos and live streams are from trusted sources.
John Lund | Blend Images | Getty Images
The end of June marked the worst first six months of a year since 1970 for the S&P 500 Index, which plummeted by more than 20% since January. But there's a silver lining: the chance to turn losses into tax breaks — as long as you follow the rules.
The strategy, known as tax-loss harvesting, allows you to sell declining assets from your brokerage account and use the losses to reduce other profits.Once losses exceed gains, you can use the excess to decrease your regular income by up to $3,000 per year.
"When clients are in loss positions, they're always interested in tax-loss harvesting," said certified financial planner Larry Harris, director of tax services at Parsec Financial in Asheville, North Carolina.
More from Personal Finance:
Here's how to prepare your portfolio as recession looms
Here’s when tax-loss harvesting does, doesn't make sense
5 steps to take now to prepare your finances for a recession
However, it gets tricky when you collect the tax break but still want portfolio exposure from that asset, Harris explained.
That's because of the so-called wash sale rule, which blocks you from claiming the tax write-off if you repurchase a "substantially identical" asset within a 30-day window before or after the sale.
To put it simply: If you violate the wash sale rule, you can't write off the loss and score a tax break.How to define 'substantially identical'VIDEO0:4200:42The silver lining when stocks slideYour Money, Your Future
While individual stocks may be easy, there's less IRS guidance on how "substantially identical" applies to mutual funds and exchange-traded funds.
"It isn't black and white," said Harris, explaining how the safest way to avoid trouble is to wait at least 30 days before repurchasing the asset in question.
However, it depends on the "facts and circumstances," of your case, according to the IRS. To stay compliant, the agency wants to see that your "economic position" has changed, Harris said.Always document your position
With limited IRS guidance, it's critical to examine mutual funds and ETFs before repurchasing within the 61-day wash sale window, experts say.
"We review it on a case-by-case basis," said Mark Rylance, a CFP and president of advisory firm RS Crum in Newport Beach, California.
For example, it may be acceptable to go from a passively-managed index fund to an actively-managed fund. But you can't sell an S&P 500 index fund at a loss and rebuy the same S&P 500 index at another company, he said.
"I think at the end of the day, it comes down to the common sense test," Rylance added.
And it's best to keep records of your decision, Harris said, suggesting that investors keep records of why assets purchased within the 61-day window aren't substantially identical.TVWATCH LIVEWATCH IN THE APPUP NEXT | ETListen
News Source: CNBC
Arizona attorney general race to have big impact on abortion rules, election claims
A typically low-key race for Arizona attorney general is set to take on a newfound sense of importance after Republicans chose a political novice turned right-wing firebrand as the party’s nominee in Tuesday’s primary.
Abraham Hamadeh, who campaigned on a staunchly conservative platform and received former President Donald Trump’s endorsement, handily defeated a slate of more experienced candidates, including a former Arizona Supreme Court justice, to secure the Republican nomination to be the Grand Canyon State’s chief legal officer. He won the primary largely by closely allying himself with the former president, soundly rejecting the centrist, business-friendly image long associated with Arizona Republicans, and staking out hard-line positions on abortion, elections, and voting rules, among other topics popular with the GOP’s base.
TRUMP-BACKED KARI LAKE WINS ARIZONA GOP GUBERNATORIAL PRIMARY
But Hamadeh’s rapid political rise has alarmed Democrats, who see him as committed to reinstating historical abortion bans, including a strict 1864 law that would allow abortion doctors to be prosecuted with prison time, while also pursuing legislative and legal efforts to call the 2020 election’s legitimacy into question. While Mark Brnovich, the incumbent Republican attorney general who lost his primary for Arizona's open Senate seat on Tuesday, has already begun efforts to reinstate the 1864 law and other historical abortion restrictions in the aftermath of the Supreme Court’s June decision to overturn Roe v. Wade, he has been an opponent of efforts to question the 2020 election and incurred Trump’s wrath for refusing to aid the former president’s efforts to have Arizona’s election results overturned.
Hamadeh, on the other hand, has firmly aligned himself with Kari Lake and Mark Finchem, the Arizona GOP’s hard-right nominees for governor and secretary of state, respectively, who have both repeatedly rejected the results of the 2020 election. He has also pledged to “prosecute the crimes of the rigged 2020 election” if elected and has seemingly endorsed efforts to “decertify” his state’s 2020 presidential electors. While it’s highly unlikely that Hamadeh will be able to follow through on any pledge to prosecute election officials or “decertify” 2020 electors even if elected, his highly controversial views have transformed the general election into an uncompromising ideological contest that will leave voters with two wildly divergent choices at the ballot box, and is set to have hugely significant implications for law enforcement in Arizona.
Hamadeh, a former Maricopa County prosecutor and Army intelligence officer, will face Democrat Kris Mayes in November’s general election. Mayes won the Democratic nomination uncontested on Tuesday after state Democrats coalesced behind her candidacy. It’s difficult to underscore how different Mayes, a former chairwoman of the Arizona Corporation Commission, is in both style and substance to Hamadeh. In contrast to Hamadeh, who backs restricting abortion from conception, Mayes has alleged that the right to abortion is protected under Arizona’s state constitution, has rejected Gov. Doug Ducey’s recently enacted 15-week abortion ban, and has claimed that prosecuting abortion doctors under the 1864 statute would be “unconstitutional.”
Mayes has also argued that the general election would be tantamount to a referendum on “democracy,” citing Hamadeh’s support for curbing mail-in voting and his unevidenced theories about the 2020 election. She has even said that, if elected, she would refuse to enforce duly enacted state laws restricting abortion.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
While much of Arizona’s attention is fixed on headline-dominating contests at the top of the ticket, the race for attorney general is sure to have an outsize impact on the direction that the state takes on a series of controversial issues, abortion and elections chief among them. And the race for Arizona attorney general is just one of several high-profile examples of how the comparatively centrist, congenial, deal-making attitudes along the lines of Ducey and Sen. John McCain that once defined statewide politics in the Grand Canyon State are nowhere to be found, at least for now.Midterms 2022 Donald Trump Arizona Campaigns News