Can I sell underwater stock in my Taxable account without triggering a DISALLOWED Wash Sale if I own the same stock in my IRA?

The IRS wash sale rule prevents you from claiming a loss when you buy "substantially identical" securities within 30 days before or after selling at a loss. This 30-day window applies across all your accounts - including IRAs. In your specific situation, since you already own the same stock in both accounts, selling from your taxable account would indeed trigger a wash sale rule violation because you continue to hold the identical security in your IRA. The loss would be disallowed for tax purposes. If you want to claim the tax loss, you'd need to sell the positions in both accounts and then wait at least 31 days before repurchasing in either account. There's no special timing requirement between selling the taxable position and the IRA position - they just both need to be sold if you want to claim the loss. Remember that selling at a loss in your IRA doesn't provide any tax benefit since IRA gains and losses aren't reported on your tax return. The wash sale rule is primarily concerned with preventing you from claiming the tax loss while maintaining your economic position in the same security.

I had this exact issue last tax season and found a solution using taxr.ai when my accountant was giving me conflicting advice. I uploaded my brokerage statements from both accounts to https://taxr.ai and they analyzed my specific situation with cross-account wash sales. What I learned was that the IRS does indeed look at your IRA holdings when determining wash sales for taxable accounts. But the key is understanding exactly how the timing works. In my case, I needed to liquidate positions in both accounts and then wait the required period before repurchasing. The tool showed me exactly which transactions were problematic and helped me properly document everything for my tax return. Their system flagged several transactions my broker's tax reporting missed. Really helped me avoid a potential audit situation.

I was initially skeptical about using a third-party tool for something as critical as wash sale calculations, but after struggling with contradictory advice from three different tax professionals, I finally tried taxr.ai last month. What surprised me was how straightforward the analysis was. I uploaded statements from my various accounts and it immediately identified several wash sale issues I wasn't aware of, including some cross-account transactions between my taxable account and Roth IRA. The detailed report showed exactly which transactions were problematic and why, with citations to the relevant tax code. What I found particularly helpful was the visualization showing the 30-day windows around each transaction. This made it easy to see exactly which trades were causing problems. For anyone dealing with complicated wash sale situations, especially across multiple accounts, I highly recommend giving it a try. It saved me from making a potentially expensive mistake on my return.

If you're still struggling with this wash sale situation, you might want to consider getting direct confirmation from the IRS. I was in a similar position last year with a complicated set of transactions across multiple accounts. After wasting hours trying to get through on the regular IRS line, I discovered https://claimyr.com through a colleague. You can watch how it works here: https://youtu.be/_kiP6q8DX5c - basically it holds your place in the IRS phone queue and calls you when an agent is about to answer. I used it to get clarification on a similar wash sale question, and the IRS agent walked me through exactly how to handle the reporting. The best part was I didn't waste hours listening to hold music - the system called me when an agent was ready. Got my answer straight from the source in about 20 minutes of actual conversation time.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway since I was desperate to resolve a wash sale issue similar to the original post. The service actually worked exactly as described. I put in my number, and about 2 hours later (while I was working on other things), I got a call connecting me directly to an IRS tax specialist. No navigating menus, no waiting on hold. The agent confirmed that selling stock at a loss in a taxable account while holding identical shares in an IRA does indeed trigger a wash sale, making the loss disallowed. She explained I'd need to sell both positions and wait 31 days before repurchasing if I wanted to claim the loss. Worth every penny to get a definitive answer directly from the IRS without wasting half a day on hold. Now I know exactly how to handle my tax reporting for these transactions.

One approach I've used in similar situations is to look at whether the stocks are truly "substantially identical." Sometimes if you have a sector ETF in one account and an individual stock from that sector in another, you might be able to avoid the wash sale rule since they're not identical securities. But with the exact same stock in both accounts like you described, I think you're stuck with the wash sale rules. When I had this issue, I ended up selling both positions and just waiting the 31 days before buying back into anything similar. Not ideal from an investment perspective, but cleaner for tax purposes.

I'd recommend a slightly different approach that worked for me. Instead of selling the same stock in both accounts, consider selling the taxable account position for the tax loss, then immediately exchanging the IRA position for something different but similar (like a competitor in the same industry). This way you're not holding the "substantially identical" security in your IRA anymore, which should allow you to claim the tax loss. And since there are no tax consequences for selling at a loss in the IRA anyway, you're not giving anything up. Just make sure whatever you exchange into isn't considered "substantially identical" to the original security. This approach let me harvest the tax loss without being completely out of the market for 31 days.

This is a really common situation that catches a lot of people off guard! You're absolutely right to be concerned about the wash sale implications. Unfortunately, since you purchased the same stock in your IRA on January 15th (just 7 days after your taxable account purchase), selling the taxable position on February 18th would indeed trigger a disallowed wash sale. The IRS looks at all your accounts - including retirement accounts - when applying the wash sale rule. Here's what I'd suggest: If you want to claim the tax loss, you'll need to sell both positions and wait at least 31 days before repurchasing the same stock in either account. Since you mentioned the stock isn't recovering anyway, this might actually work in your favor from an investment perspective. One thing to keep in mind - your broker's 1099-B will likely NOT flag this as a wash sale because most brokers only track wash sales within the same account. It's your responsibility to identify and properly adjust for cross-account wash sales when filing your return. If you're looking to stay invested in the same sector, consider selling both positions and immediately buying a similar but not identical stock (like a competitor or sector ETF) to avoid being completely out of the market during the 31-day waiting period.