For a calendar-year investor selling ordinary exchange-traded stock, use the executed trade date to identify the tax year, not the settlement date. IRS Publication 550 explicitly gives a December 31 sale paid in January as a sale reported for the earlier year. An unfilled order is not an executed sale.
Short sales and other instruments have separate rules.
A December sale can settle in January
Suppose shares with an adjusted basis of $8,000 are sold for $6,000 on December 31. Ignoring fees, the realized loss is $2,000. January settlement does not change that tax year.
Before using the loss, check purchases of substantially identical securities during the 30 days before and after the sale, including automatic reinvestments.
The wash-sale review crosses January
A January repurchase can disallow a December loss. Review activity across relevant accounts; a broker reporting one account may not detect every wash sale. A replacement purchase in an IRA can have a different result from an ordinary taxable-account basis adjustment.
Reference
Three dates to distinguish for a year-end stock sale
| Event | Effect |
|---|---|
| Order entered | No realized sale if the order never executes |
| Trade executed | Generally determines the tax year for exchange-traded stock |
| Settlement | Delivery and payment; can occur the following year |
Take it with you
Year-end: actions and records
- Keep the trade confirmation with its execution date and adjusted basis.
- Review purchases on both sides of the loss sale, including reinvestments.
- Identify the replacement account before assuming a disallowed loss increases basis.
People also ask
Questions about Tax-Loss Harvesting Deadline: Trade Date and Wash Sales
Is a different ticker enough to avoid a wash sale?
No automatic safe harbor follows from a different ticker. The legal test concerns substantially identical securities.
Can a loss in my IRA offset gains in my taxable account?
A sale inside an IRA does not create a deductible capital loss on the individual return.
What exactly counts as 'realizing' a loss for tax purposes?
For securities traded on an established market, IRS Publication 550 generally uses the trade date to determine the tax year of the sale, rather than the later settlement date. An unexecuted order is not a completed trade. Confirm special rules for the particular asset and transaction before using the year-end date.
How does the wash-sale rule actually work?
A loss sale can be a wash sale when substantially identical securities are acquired within the period from 30 days before through 30 days after the sale. The rule can include certain contracts or options. A taxable replacement generally carries a basis adjustment; an IRA replacement has different consequences.
Can I sell a loss and immediately buy a similar but different fund?
Here is a common strategy, but whether two funds are 'substantially identical' for wash-sale purposes isn't always clear-cut: consult a tax professional about specific securities, rather than assuming any different ticker avoids the rule
Does tax-loss harvesting apply to retirement accounts like a 401(k) or IRA?
Generally no. The tax benefit of harvesting applies to taxable investment accounts, since gains and losses in tax-advantaged retirement accounts aren't taxed the same way in the first place
How much loss can I actually use against my income in one year?
Capital losses first offset capital gains under the netting rules. If net losses remain, an individual generally may deduct up to $3,000 against other income, or $1,500 if married filing separately; unused amounts can carry forward. A tax reduction is not reimbursement of the entire investment loss.
Is there a deadline earlier than December 31 that's actually safer to target?
There is no separate universal early-December federal harvesting deadline. Decide while there is time to review tax lots, replacement purchases and market trading hours. For an ordinary market security, the trade-date convention matters; settlement timing should not be substituted for that tax-year rule.
Does the wash-sale rule apply across different brokerage accounts?
Yes, generally. The rule applies across all of your accounts, including those at different brokerages and even a spouse's accounts in some interpretations, not just within a single account
What if I accidentally trigger a wash sale?
For a taxable-account replacement, the disallowed loss generally adjusts the replacement shares’ basis, delaying its benefit. A replacement purchase in an IRA can instead permanently disallow the loss without increasing the IRA’s basis, as described in Revenue Ruling 2008-5. Keep records across accounts rather than assuming the broker’s report captures every purchase.
References for Tax-Loss Harvesting Deadline: Trade Date and Wash Sales
This discussion covers ordinary exchange-traded shares held as investments by a calendar-year taxpayer. Short sales, options, straddles and dealer or trader elections can change the analysis.