What must investors do before they can buy back an asset sold at a loss to deduct their loss on tax returns?

To deduct a loss on tax returns for an asset that has been sold, investors must adhere to the "wash sale rule." This rule states that if an investor sells a security at a loss and then repurchases the same or substantially identical security within 30 days before or after the sale, the loss cannot be deducted for tax purposes. Therefore, to be eligible to deduct the loss, an investor must wait at least 31 days after the sale before repurchasing the same asset. This ensures that the sale is considered legitimate and not simply a tactical move to recognize a tax deduction while still maintaining the position in the asset.

Waiting for a longer period, such as 60 days, 15 days, or 45 days, would not fit the criteria established by the Internal Revenue Service (IRS) regarding the wash sale rule, which specifically highlights the 30-day window around the sale. Thus, the requirement to wait for 31 days aligns perfectly with the guidelines necessary to claim a tax deduction for the loss incurred.