Tax Selling


DEFINITION of 'Tax Selling'

A type of sale whereby an investor sells an asset with a capital loss in order to lower or eliminate the capital gain realized by other investments. Tax selling allows the investor to avoid paying capital gains tax on recently sold or appreciated assets.


When participating in tax selling, an investor must not execute a wash sale. Wash sales occur when an investor sells an asset through a broker in order to realize a loss, but simultaneously repurchases the same asset from another broker. This strategy allows the investor to maintain his or her position while incurring a capital loss. Wash sales are illegal, whereas tax selling is allowable.

Tax selling often occurs in December, as investors try to realize capital losses for the upcoming income tax season. If investors would like to repurchase the shares sold for a loss, they can do so after the 30-day wash sale rule no longer applies. In addition, shares sold for a loss must have been in the investor's possession for more than 30 days.

  1. Income Tax

    A tax that governments impose on financial income generated by ...
  2. Capital Appreciation

    A rise in the value of an asset based on a rise in market price. ...
  3. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  4. Capital Gains Tax

    A type of tax levied on capital gains incurred by individuals ...
  5. Wash Sale

    A transaction where an investor sells a losing security to claim ...
  6. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
Related Articles
  1. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  2. Investing Basics

    Solutions For Concentrated Positions

    Investopedia explains various tactics for divesting your overexposure to any one stock.
  3. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  4. Retirement

    To Sell Or Not To Sell

    Learn some tips on how to exit a position to the best of your advantage.
  5. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  6. Taxes

    Capital Gains Tax Cuts For Middle Income Investors

    Find out how TIPRA plans to slash taxes for those in the 10-15% tax bracket.
  7. Stock Analysis

    Why did Wal-Mart's Stock Take a Fall in 2015?

    Wal-Mart is the largest company in the world, with a sterling track-record of profits and dividends. So why has its stock fallen sharply in 2015?
  8. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  9. Investing News

    Should You Invest in Disney Stock Before Star Wars?

    The force is strong with Disney stock, as it continues to make gains going into the launch of EP7. But is this pricey stock a good buy at these levels?
  10. Investing News

    Silicon Valley Startups Fly into Space

    Space enthusiasts are in for an exciting time as Silicon Valley startups take on the lucrative but expensive final frontier.
  1. Can I give stock as a gift?

    Stocks, bonds or any other securities can be transferred as gifts. Giving the gift of stock also has benefits for the giver. ... Read Full Answer >>
  2. Do tax brackets include Social Security?

    A portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined ... Read Full Answer >>
  3. Do 401k contributions reduce AGI and/or MAGI?

    Traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). ... Read Full Answer >>
  4. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  5. Do financial advisors charge VATs?

    The Personal Finance Society (PFS) and with Her Majesty's Revenue and Customs (HMRC) have outlined when a value-added tax ... Read Full Answer >>
  6. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center