A 63-Year-Old Trying To Harvest A $40,000 Loss In Nvidia Stock Before Year-End Faces A Potential IRA Trap. A 2008 IRS Ruling Means One Easy Mistake Could Wipe Out The Write-Off Permanently AJ Tiarsmith Sat, November 14, 2026 at 9:43 AM EST 6 min read NVDA -3.12% Trade NVIDIA on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Selling Nvidia at a $40,000 loss and rebuying it in an IRA within 30 days lets the IRS erase the write-off permanently.
Revenue Ruling 2008-5 treats the owner as the buyer, so the IRA's basis doesn't rise and the disallowed loss disappears forever.
Waiting 31 days before the IRA buys, and pausing dividend reinvestment, preserves a $3,000 annual deduction with the rest carried forward.
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Before harvesting losses this year, investors who hold NVIDIA (NASDAQ:NVDA) in a taxable brokerage account and also have an IRA should check the wash sale rule's IRA trap. Say you sell a losing stock for the write-off and then rebuy it inside your IRA within 30 days. The IRS can erase that loss permanently. A 2008 revenue ruling spells it out.
Consider a hypothetical retired engineer, age 63, is married filing jointly for the sake of explaining the wash sale IRA trap. The couple's portfolio totals $1.9 million: $1.35 million in a traditional IRA and $550,000 in a brokerage account at the same broker. They live on a pension plus portfolio withdrawals and haven't claimed Social Security yet.
Their Nvidia shares sit in the taxable account. They paid $160,000 near the October peak, and the position is now worth $120,000, which leaves a $40,000 paper loss. In December they sell everything to lock in the loss. They still like the stock, so six days later they buy the same number of shares inside the traditional IRA. Their reasoning is that the IRA is a separate pot. The IRS disagrees.
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The wash sale rule comes from 26 U.S.C. § 1091(a). It denies a loss deduction when you buy "substantially identical stock or securities" in the window that starts 30 days before the sale and ends 30 days after it. IRS Publication 550 lists one trigger by name: buy "substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA."
Revenue Ruling 2008-5 explains why. An investor in the example sells shares at a loss on December 20, 2007, and has an IRA buy the same stock on December 21, 2007. The IRS treated the owner as the buyer even though an IRA is a tax-exempt trust. Its holding: "The loss on the Sale of stock is disallowed under § 1091. A's basis in the individual retirement account or Roth IRA is not increased by virtue of § 1091(d)."
An ordinary wash sale only delays your deduction. Under Publication 550, the disallowed loss gets added to the cost of the new shares, which "postpones the loss deduction until the disposition of the new stock or securities." That fix specifically bars the IRA purchase case. With no basis to raise, the loss is gone.
Your spouse's trades count too. Per Publication 550: "If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale."
Nvidia closed at $168.89 on Nov. 10, down 5.47% from its $178.67 close on Nov. 9. The drop came as the board reviews reports involving CEO Jensen Huang after opening an inquiry. The stock is down 25.9% over the past month, so plenty of holders are sitting on fresh paper losses.
The IRS caps the net capital loss you can deduct against other income at $3,000 a year ($1,500 if married filing separately). The unused part carries forward. In the trap row, all of that value disappears. This is one of several quiet IRS rules that can cost retirees six figures over time, and we charted the rest in a free tax trap map.
Sell by the trade date. The trade date sets the tax year, not the settlement date. In Publication 550's example, stock sold on December 31, 2025 and settled in January still goes on the 2025 return.
Hold off on IRA purchases. Wait 31 days after the sale before the IRA buys Nvidia. Also look back at the 30 days before the sale, because the window runs in both directions.
Disable automatic buys. Pause dividend reinvestment and recurring purchases of Nvidia in your IRA, your Roth IRA and your spouse's accounts.
Watch options. Publication 550 says the wash sale rules "apply to losses from sales or trades of contracts and options to acquire or sell stock or securities."
Swap with care. If you want to stay invested, the IRA can buy something that is not substantially identical.
"Substantially identical" is often a judgment call. Before you swap into a fund that holds a lot of Nvidia, get a professional review. Do the same if automatic IRA purchases or reinvested dividends landed near your sale date, or if your IRA already bought shares inside the window. In this case, the gap between the two rows is $40,000 of write-offs, and the deadline is Dec. 31.
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