By |Published On: Apr 1, 2024|Categories: Financial Planning, RSUs|

As you finalize your taxes for last year, you may be agonizing over a wash sale in 2023.

Let’s look at what a wash sale is.

Wash Sale in 2023

It’s like selling your umbrella to your best friend for a price below what you paid. But then you buy it back within 30 days because you forgot it rains a lot in the spring and you don’t want to get wet.

Even though you are in the red on the sale of the umbrella, you cannot claim it as a loss on your taxes because you still own the umbrella.

So What Can You Do?

When it comes to your umbrella, hope that it still works and it doesn’t get turned inside out by a large gust of wind.

If you have a wash sale in 2023, here’s what to do. Get a copy of the 1099 from the stock plan custodian and see if they reported the wash sale. If they do, you’ll see it indicated with language similar to the following – “adjustment to cost basis with a code W” under the 1099B section.

Unfortunately, most of the time, wash sales are not reported correctly by the custodians.

Either way, alert your CPA about the situation! They will be able to guide you through how to manage your wash sales.

Going Forward

Remember that a wash sale occurs if you sell company shares for a loss and buy more company shares within 30 calendar days before or after the loss transaction. Because the window is 30 days before or after the sale, the window is really 61 days.

Sometimes wash sales usually occur inadvertently.

You are probably wondering how?

When your company shares vest every month (every 30 days) it’s impossible to avoid.

Shares are “bought” when they vest and some are sold for tax withholding, so you can’t really avoid at least some level of wash sales with monthly vesting.

Setting up a Strategy for Wash Sales

There’s no escaping wash sales in 2023 or in the future when your shares vest every 30 days. These buys and sells of company stock are involuntary.

However, when you work with a financial planning professional, you can set up a personal strategy to manage your voluntary sales of company shares to best handle wash sale implications.

What questions do you have about wash sales with monthly vesting? Set up a time to chat about spring, umbrellas, and wash sales.