Wash Sales

One investing technique that can help investors accelerate losses without significantly changing their investment position is to sell securities at a loss and then replace them with the same or similar securities. However, you must be aware of the rules on "wash sales."

In general, you cannot buy the equivalent stock within 30 days before or 30 days after you sell your stock and deduct the loss. What you can do is sell the stock on which you have a paper loss to receive the loss this year, and then replace those stock shares with stock from another company in the same industry having similar prospects. Or, "double up" on the stock and sell your original shares 31 days later at a loss.

Note that these wash sale restrictions do not apply to stocks sold at a gain. If you have accumulated capital losses (either from the current year or carried over), consider selling stock with built-in gain to offset these losses. You can then immediately repurchase the stock, essentially sheltering some of your gains without changing the makeup of your portfolio.