Tax strategy for selling and rebuying stocks to reset cost basis?

You need to be careful with this strategy because of the wash sale rule. The IRS doesn't allow you to claim a loss on a security if you buy the same or "substantially identical" security within 30 days before or after selling at a loss. However, in your case, you're planning to sell stocks with unrealized gains, not losses. The wash sale rule doesn't apply when you sell at a gain. So technically, you could sell your appreciated stocks, recognize the gains, use your carried-over losses to offset those gains, and then immediately repurchase the same stocks to establish a new, higher cost basis. But remember that any net gains that exceed your carried-over losses will be taxable. Also consider transaction costs and the potential for price movement between selling and buying back.

I tried using https://taxr.ai when I was doing something similar last year. I uploaded my brokerage statements and it helped me identify which positions made the most sense to sell based on my tax situation. It considers your loss carryovers automatically along with your current year gains/losses to optimize the tax outcome. One thing I learned is that it's not always best to reset your entire portfolio - sometimes it makes more sense to be selective about which positions to reset. The tool really helped me figure out the most tax-efficient approach.

Just wanted to update after trying taxr.ai based on the recommendation here. It was actually super helpful for my situation! I had a mix of some big winners from 2019-2020 and some decent losses from the 2022 downturn that I'd been carrying forward. The tool showed me exactly which positions made sense to sell and rebuy, and which ones I should just keep holding. The analysis saved me from making a big mistake - I was going to reset everything, but it turns out that would have triggered unnecessary taxes on some positions where my carried-over losses wouldn't have fully offset the gains. Ended up saving about $3,200 in taxes I would have unnecessarily paid if I'd gone with my original plan. Definitely changed my approach to tax-loss harvesting.

I tried calling the IRS to get clarification on this exact strategy last year and spent literally 3+ hours on hold before giving up. Then I found https://claimyr.com which got me through to an actual IRS agent in about 20 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent confirmed what others are saying here - wash sale rules only apply to losses, not gains. They also told me to keep good records of my original purchase dates so I could properly calculate long-term vs short-term capital gains on the sales.

Just had to come back and say that Claimyr actually worked! After my skeptical comment earlier, I decided to try it since I had questions about capital loss carryovers that were similar to the original post. I had attempted to call the IRS three separate times on my own, waiting over an hour each time before giving up. With Claimyr, I got connected to an agent in about 35 minutes. The agent confirmed that I could use my carryover losses to offset gains from selling appreciated stock and then buy back those same stocks immediately to reset my basis. They also told me something really useful - I need to be careful about holding periods. If I sell stock I've owned for over a year (long-term gain) but rebuy and sell again within a year, that second sale would be a short-term gain taxed at my ordinary income rate.

One thing to consider with this strategy is how close you are to the end of the tax year. If you're planning to do this in December, you might want to split the transactions across year boundaries. For example, you could sell stocks to realize gains in December 2025, offsetting them with your carried-over losses. Then you could wait until January 2026 to repurchase. This way, if the market happens to drop right after your sale, you might be able to repurchase at an even better price in the new year. Just another strategic consideration on timing!

Has anyone here considered the alternative minimum tax (AMT) implications when doing this? I did something similar last year and ended up triggering AMT unexpectedly which basically negated a lot of the tax benefits I was trying to achieve.

Dont forget to also consider state tax implications! Some states have different rules for capital gains. I live in California and did this strategy last year, worked great for federal taxes but CA had some quirks that meant I didn't get quite the same benefit at the state level. Check your states rules before proceeding!!

One additional consideration that hasn't been mentioned yet is the impact on your investment strategy timing. While the tax benefits are clear, you'll want to think about market conditions when executing this. If you're planning to sell and immediately rebuy, consider doing it during lower volatility periods or when the market is relatively stable. I made the mistake of trying this during a particularly volatile week last year and ended up rebuying at prices significantly higher than my sale price due to rapid market movement. Also, if you're dealing with large positions, consider breaking the transactions into smaller chunks over a few days to avoid moving the market against yourself, especially with less liquid stocks. The tax benefits are great, but execution matters too!

Something else to keep in mind is the potential impact on your overall asset allocation. When you sell and rebuy stocks to reset your cost basis, you might be out of the market for a brief period (even if it's just minutes), and during volatile times this could affect your portfolio balance. I'd recommend reviewing your target allocation before executing this strategy. If you're planning to reset cost basis on a significant portion of your equity holdings, consider whether you need to rebalance other positions at the same time to maintain your desired asset mix. Also, make sure you have enough cash available in your account to rebuy immediately after selling. The last thing you want is to have your sale settle and then discover you can't rebuy right away due to settlement timing or insufficient funds, especially if the stock starts moving up while you're waiting.

This is a solid tax strategy that I've used successfully myself. Just want to emphasize a few key points that others have touched on: 1. **Documentation is crucial** - Keep detailed records of your original purchase dates, sale dates, and repurchase dates. You'll need this for future tax calculations, especially to track holding periods for long-term vs short-term treatment on future sales. 2. **Consider your overall tax picture** - Make sure you're not pushing yourself into a higher tax bracket by realizing all these gains at once. Sometimes it makes sense to spread this strategy over multiple tax years. 3. **Transaction costs matter** - Don't forget to factor in brokerage fees when calculating whether this strategy makes financial sense, especially for smaller positions. 4. **Review quarterly** - I've found it helpful to reassess this strategy quarterly rather than just once per year, as your loss carryovers and current year gains/losses can change significantly throughout the year. The strategy absolutely works from a tax perspective - just make sure the execution aligns with your broader financial goals and risk tolerance. Good luck!