What is the wash sale rule?

Prevents deducting a loss if you buy the same or substantially identical security within 30 days before or after the sale at a loss. The disallowed loss is added to the basis of the replacement shares.

What is a substantially identical security?

Same stock or options are clearly identical. Different but highly correlated ETFs may or may not be identical. The IRS has not provided definitive guidance on similar funds.

Does the wash sale rule apply to crypto?

Currently, cryptocurrency is classified as property, not a security, so the wash sale rule does not technically apply to crypto in 2024. However, proposed legislation may change this.

How does the wash sale rule affect the basis?

Example: Buy 100 shares at $50, sell at $40 (loss of $1,000). Buy same shares at $35 within 30 days. New basis = $35 + $10 = $45, preserving the loss for future sale.

How do I report a wash sale?

Broker reports wash sales on Form 1099-B with a W indicator. Losses are shown but disallowed. Report on Schedule D and Form 8949 with the W code, entering the disallowed amount.

US Wash Sale Rule Impact Calculator

Calculate wash sale rule impact on tax-loss harvesting. 30 days before/after selling at a loss, cannot repurchase substantially identical securities. Disallowed loss added to replacement security basis.

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Frequently Asked Questions

What is the wash sale rule?

What is a substantially identical security?

Does the wash sale rule apply to crypto?

How does the wash sale rule affect the basis?

How do I report a wash sale?