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The wash sale rule: the 61-day window that eats losses

Desk calculator on squared paper with a pencil

Tax-loss harvesting has one famous tripwire: sell at a loss, buy substantially identical securities within 30 days before or after the sale (61 days counting the sale day itself), and the IRS disallows the loss. The mechanics are simpler than the folklore. Checked 2026-08-22 against IRS Publication 550; general information, not tax advice.

Sale at a loss 30 days before 30 days after a repurchase anywhere in the shaded window washes the loss

The mechanics

Sell stock or securities at a loss and buy substantially identical ones within 30 days BEFORE or AFTER (61 days counting the sale day) and the loss is disallowed for that year. Not destroyed: it is added to the basis of the replacement shares, so it returns when you finally exit for real. The before side is the one people forget: buying on the 10th and harvesting the older lot on the 25th is already a wash. It also crosses accounts, including your IRA, where the deferred loss genuinely dies instead.

Substantially identical, in practice

The same ticker, obviously; options on it too. Two S&P 500 funds from different providers are, in most practitioners’ reading, dangerously close; an S&P 500 fund swapped for a total-market fund is the classic harvest pair that keeps exposure without identity. The IRS has never published a bright line, which is itself worth knowing.

Crypto: still exempt, with two asterisks

Held directly, crypto is property, not a security, so section 1091 does not reach it in 2026: selling at a loss and rebuying the next day still books the loss. Asterisk one: crypto held through an ETF is a security and fully inside the rule. Asterisk two: Congress keeps trying to close the gap, most recently a June 2026 bill covered by CNBC; as of August 2026 the exemption still stands, and we will update this paragraph when that changes.

Harvesting without tripping

The boring playbook:

  • Harvest into a similar-but-not-identical fund.
  • Want the same asset back? Wait out the 31 days.
  • Keep automatic reinvestments (dividends, DCA plans) in view: a 200 dollar auto-buy washes a 20,000 loss on that lot.
  • Log everything. Brokers flag same-account washes on the 1099-B; cross-account ones are on you.