Wash Sale Rule

The Wash Sale Rule is a regulation that prevents investors from claiming a tax deduction for a loss on a security if they repurchase the same or a substantially identical security within 30 days before or after the sale. This rule aims to discourage tax avoidance through strategic selling and repurchasing of investments. For instance, if you sell a stock at a loss and then buy it back shortly after, the loss cannot be used to offset capital gains for tax purposes. The intention is to maintain the integrity of tax reporting.