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An IRS rule that blocks you from claiming a tax loss if you buy the same stock back within 30 days.
Why It Matters
Tax-loss harvesting is powerful, but the wash sale rule prevents abuse. You can't sell a stock for a loss, claim the tax deduction, and immediately buy it back. You must wait 31 days - or buy a similar (but not identical) investment. Violate the rule and your loss is disallowed; it gets added to the cost basis of the new shares instead.
Key Points
- Applies 30 days before AND after the sale (61-day window total)
- "Substantially identical" includes options on the same stock
- Workaround: Sell S&P 500 fund, buy total market fund (similar but not identical)
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Tax-Loss Harvesting
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Common Questions
An IRS rule that blocks you from claiming a tax loss if you buy the same stock back within 30 days. Tax-loss harvesting is powerful, but the wash sale rule prevents abuse. You can't sell a stock for a loss, claim the tax deduction, and immediately buy it back.
Tax-loss harvesting is powerful, but the wash sale rule prevents abuse. You can't sell a stock for a loss, claim the tax deduction, and immediately buy it back. You must wait 31 days - or buy a similar (but not identical) investment. Violate the rule and your loss is disallowed; it gets added to the cost basis of the new shares instead.
Applies 30 days before AND after the sale (61-day window total)
"Substantially identical" includes options on the same stock
Workaround: Sell S&P 500 fund, buy total market fund (similar but not identical)