Retiree Loses $2,430 Tax Break After $9,000 IRA Reinvestment Triggers Wash-Sale Rule
Updated
Updated · 24/7 Wall St. · May 18
Retiree Loses $2,430 Tax Break After $9,000 IRA Reinvestment Triggers Wash-Sale Rule
2 articles · Updated · 24/7 Wall St. · May 18
$9,000 of a 66-year-old retiree’s $90,000 year-end loss harvest was disallowed after her IRA automatically reinvested VTI dividends within 30 days of the sale.
That wash-sale cut her expected tax savings by $2,430, based on a 22% federal rate plus 5% Pennsylvania tax, even though the lost basis is deferred rather than erased.
The mistake mattered because she was using a $1.1 million brokerage portfolio to help generate about $55,000 a year alongside Social Security, making even a modest tax hit meaningful for future withdrawals.
The report says retirees harvesting losses should turn off DRIP in every account, avoid substantially identical repurchases for 31 days, and use substitutes such as swapping VTI for ITOT to keep market exposure.
Could a forgotten setting in your IRA secretly trigger an unexpected tax bill?
When does automated investing become a hidden financial trap for savvy retirees?