You can't sell an asset for a loss in a taxable account and then buy the asset back into a retirement account, such as a 401 (k) or IRA, within 30 days and still claim a loss in the taxable account. You simply can't sell a stock, buy it again within 30 days, and then claim the loss incurred in the sale to offset the capital gains taxes due. If you sell the stock at a loss, you can deduct the losses incurred from profits in a taxable brokerage account. However, if you sold stocks at a loss in an IRA, you won't be able to claim losses against profits reported in the IRA.
When you sell an investment that has lost money in a taxable account, you can get a tax benefit. The illegal selling rule prevents investors from selling at a loss, buying the same (or substantially identical) investment within 61 days and claiming the tax benefit. It applies to most investments you might have in a typical brokerage or IRA account, including stocks, bonds, mutual funds, exchange-traded funds (ETFs) and options. The simplified selling rule prohibits capital losses if the same security is bought again within 30 days of its sale.
This is bad for unprotected investments, but it has no consequences for traders who buy and sell in an IRA, since no capital losses are reported in an IRA. However, you can't circumvent the fraudulent sale rule by selling shares in your regular account at a loss and buying them back within 30 days in your IRA account. The IRS calls this a fraudulent sale and will dismiss your claim for loss in your regular account. If you have an IRA, you can use IRA funds to buy, sell, and buy back shares in your retirement account as often as you want in a day.
Using an IRA for trading can help you postpone paying taxes on profits earned from selling stocks and eliminates the need to file taxes. If you use a Roth IRA to trade stocks, you can avoid paying taxes on profits made from stock trading. In the ruling, the IRS explained that when shares are sold in a non-retirement account and substantially identical shares are purchased in an IRA within 30 days, the investor cannot claim tax losses for the sale and does not increase the person's IRA base. The IRS allows investors to buy and sell stocks in a traditional and Roth IRA as they would with a brokerage account.
One of the advantages of using an IRA to trade stocks is that it can postpone paying taxes on the sale of stocks during the year of sale. An IRA is a tax-advantaged retirement account, and this advantage applies to the tax status of your stock investments.