The wash sale rule disallows tax loss deductions on repurchased securities It applies to stocks, bonds, options, and other substantially identical securities Designed to prevent artificial tax losses while maintaining the same investment position Violations result in deferred loss recognition and adjusted cost basis

The 30-Day Rule Explained

Cannot claim a loss if identical security is purchased 30 days before the sale Cannot claim a loss if identical security is purchased 30 days after the sale The full window is 61 days: 30 days before + sale date + 30 days after The rule applies to your spouse's transactions and controlled entities as well

Substantially Identical Securities

Same company stock is always considered substantially identical regardless of share class Bonds from the same issuer with similar terms may also qualify as identical Broad market index funds from different providers are generally not identical Options on the same underlying stock are typically considered substantially identical

Cost Basis and Cross-Account Impact

Disallowed loss is added to the replacement security's cost basis Holding period includes the original security's holding period for tax purposes The loss is not permanently lost, just deferred until the final sale of replacement shares An IRA purchase within 30 days disallows the taxable account loss permanently

Common Wash Sale Mistakes

Repurchasing identical stock in a different account type within 30 days Buying back on day 30 instead of waiting the full 31 days Overlooking a spouse's purchases in joint or separate accounts Assuming different brokerages prevent the wash sale rule from applying

Wait 31+ days before repurchasing to preserve the tax loss benefit Purchase similar but not identical securities in the same sector as a substitute Use ETFs tracking different but similar indexes to maintain market exposure Consider doubling your position 31 days before the sale, then selling original shares

Wait 31 days minimum before repurchasing sold securities to preserve tax losses Monitor all accounts including spouse's IRAs to avoid inadvertent violations Use similar but not identical alternatives to maintain market exposure during the wait Maintain detailed records of all transactions for accurate basis calculations

Wash Sale Rules Explained

Curated by: Rubric Advisors

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IRS Wash Sale Rules

The wash sale rule disallows tax loss deductions on repurchased securities
It applies to stocks, bonds, options, and other substantially identical securities
Designed to prevent artificial tax losses while maintaining the same investment position
Violations result in deferred loss recognition and adjusted cost basis

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IRS Wash Sale Rules

The 30-Day Rule Explained

Substantially Identical Securities

Cost Basis and Cross-Account Impact

Common Wash Sale Mistakes

Avoidance Strategies

Key Takeaways

Related Topics

Capital Gains Tax Rates

Tax-Loss Harvesting: A Complete Guide

Gifting Appreciated Stock: A Tax-Smart Way to Give

IRS Wash Sale Rules

The 30-Day Rule Explained

Substantially Identical Securities

Cost Basis and Cross-Account Impact

Common Wash Sale Mistakes

Avoidance Strategies

Key Takeaways

Related Topics

Capital Gains Tax Rates

Tax-Loss Harvesting: A Complete Guide

Gifting Appreciated Stock: A Tax-Smart Way to Give