End-of-Year Tax Planning For Federal Employees: Part 4 Avoiding The Wash Sale

After a year of wild stock market swings and declines, most federal employees have investment accounts that are sitting in the red, and while it’s difficult to watch your account value drop, many find a silver lining in the form of tax savings.

The tax strategy many federal employees utilize is tax loss harvesting, an effective strategy for building a bank of tax offsets. This strategy involves selling investments that have experienced a loss and reporting those losses when they file their tax return, allowing capital gains for the year to be offset dollar for dollar.

As effective as harvesting is, complications often arise when federal employees seeking to maintain the same mix of investments purchase a substantially identical security and accidentally trigger a wash sale, nullifying their losses.

So, for our fourth and final installment in our tax planning series, we’re going to review how federal employees can avoid a wash sale. Continue reading...