Wash Sale: Definition, 30-Day Rule and Tax Basis

Written by HonestCredit Editorial Team Updated Sep 18, 2026 4 min read

A wash sale generally occurs when stock or securities are sold at a loss and substantially identical stock or securities are acquired within 30 days before or after the sale. The loss is generally disallowed currently, with basis and holding-period rules determining what happens next.

The rule is designed to prevent taxpayers from claiming a tax loss while effectively maintaining the same investment position.

Key Takeaways

61-day window: The rule looks 30 days before the loss sale, the sale date, and 30 days after.
Substantially identical matters: Buying the same security is the clearest case, but facts can matter for similar securities.
Loss is usually deferred, not erased: In taxable accounts, the disallowed loss generally increases replacement-share basis.
IRA purchases are different: Buying replacement shares in an IRA or Roth IRA can cause a less favorable result.

How the 30-Day Wash-Sale Window Works

A wash sale generally occurs when substantially identical stock or securities are acquired within 30 days before or after a loss sale. That creates a 61-day period centered on the transaction date.

Example: An investor sells 100 shares at a $1,000 loss on June 15 and repurchases the same 100 shares on June 30. The repurchase falls inside the 30-day post-sale window, so the loss is generally disallowed currently.

What Happens to the Disallowed Loss?

For a typical taxable-account wash sale, the disallowed loss is added to the basis of the replacement stock or securities. The holding period of the replacement position also generally includes the holding period of the shares that were sold.

This treatment postpones the deduction rather than permanently eliminating it in many ordinary taxable-account situations.

What Does “Substantially Identical” Mean?

The same stock or security clearly qualifies. Beyond that, the analysis becomes more fact-specific because federal tax law does not provide a simple universal percentage test for similarity.

Options or contracts to acquire substantially identical securities can also trigger the rule. Investors using tax-loss harvesting should therefore avoid assuming that changing only a ticker symbol automatically avoids wash-sale treatment.

Note: Two broad-market funds that follow different indexes are not automatically treated the same, but the tax question depends on the actual facts and instruments involved.

Wash Sales Across Accounts and Related Purchases

The wash-sale rule can apply even when replacement shares are acquired in another taxable brokerage account. Publication 550 also addresses purchases by a spouse or a corporation controlled by the taxpayer in certain situations.

Because brokers may not see every account or related purchase, a brokerage Form 1099-B does not necessarily identify every wash sale the taxpayer must report.

Why IRA and Roth IRA Purchases Are Riskier

If substantially identical stock is acquired for an IRA or Roth IRA within the wash-sale window, the loss can be disallowed without the ordinary taxable-account basis increase that would preserve it for later use.

Important: Moving the replacement purchase into an IRA does not create a workaround. It can make the tax treatment worse because the disallowed loss may not be recoverable through basis in the retirement account.

Wash Sales and Tax-Loss Harvesting

Tax-loss harvesting deliberately realizes losses to offset capital gains or, within limits, other income. The strategy only works as intended when replacement purchases do not violate the wash-sale rules.

Investors can wait until the window closes, purchase a non-substantially-identical investment, or adjust portfolio exposures in another way while maintaining the desired allocation.

Partial Wash Sales

If fewer replacement shares are purchased than were sold at a loss, only the corresponding portion of the loss may be disallowed. Matching rules determine which shares and losses are affected.

Large portfolios with recurring purchases, dividend reinvestment, or automatic contributions can create partial wash sales unintentionally.

Recordkeeping and Reporting

Taxpayers should track sale dates, acquisition dates, quantities, basis, and purchases across all relevant accounts. Brokers report many wash-sale adjustments, but they may not capture transactions at another institution or in related accounts.

Records should also preserve the replacement shares’ adjusted basis and holding period because those changes can affect the tax result when the replacement position is eventually sold.

Frequently Asked Questions (FAQs)

Is the wash-sale period 30 days or 61 days?

The rule looks 30 days before and 30 days after the loss sale, plus the sale date itself, creating a 61-day window.

Does a wash sale permanently eliminate the loss?

Often no in taxable accounts; the loss is generally added to replacement-share basis and deferred. IRA-related cases can be less favorable.

Can dividend reinvestment trigger a wash sale?

Potentially yes if substantially identical shares are acquired within the relevant window.

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