Tax

What is the wash sale rule?

The wash sale rule blocks a loss deduction when you sell a stock, ETF or fund at a loss and buy the same or a "substantially identical" security within 30 days before or 30 days after the sale — a 61-day window. The loss is not gone: it is added to the cost basis of the new shares and counts when you finally sell them. The rule applies across all your accounts, including your IRA and your spouse's accounts.

Tax is national. This page describes the federal rules in the United States for tax year 2026. Most states add their own income tax on top, so there is never one single US rate. If you live and pay tax in another country, the rules are different — see the flags below.

The price is just the price — and it moves all the time.

How it works

Only losses. Selling at a gain and buying back the next day is fine (you just pay the tax on the gain).
61 days, both directions. Buying more shares in the 30 days before a loss sale also triggers it — a monthly automatic investment can do that by accident.
"Substantially identical." The same stock, the same ETF, or an option on it. Two different S&P 500 ETFs from different providers are generally treated as not identical — but the IRS has never drawn the line precisely.
The loss moves, it does not vanish. Sell at a $1,000 loss, buy back at $50: your new basis is $50 + $1,000 = $1,050 per the disallowed amount, so the loss reappears when you sell the new shares — unless the repurchase was in an IRA, where it is lost for good.
Your broker tracks it within one account and reports it on Form 1099-B (box 1g). Across accounts, you must.

The worked example

You bought 100 shares at $50 ($5,000). In December they trade at $40 and you sell for $4,000 to "harvest" the $1,000 loss — then buy 100 shares back on 2 January at $41. Wash sale: the $1,000 is disallowed this year and added to the new shares, whose basis becomes $4,100 + $1,000 = $5,100. Wait until 31 days after the sale to buy back, and the $1,000 loss counts this year.

Figures for 2026 from irs.gov (Rev. Proc. 2025-32 and IR-2025-111), checked September 2026. Your state may tax the same income again. Kiggo does not calculate your tax — your broker reports to you on Form 1099, and the IRS, your state and a tax professional decide.

Kiggo says: The wash sale rule is the IRS saying: you cannot claim you left if you were back inside a month.

The typical beginner's mistake

Selling a loser on 28 December for the tax loss and buying it back on 3 January "to keep the position". The loss is disallowed — and worse, if the buy-back was inside an IRA, it is lost permanently.

How you see it in Kiggo

Kiggo's portfolio shows the positions you enter yourself and the gain or loss on each. It does not track wash sales or calculate your tax.

Frequently asked questions

How long do I have to wait to avoid a wash sale?

Buy back no earlier than 31 days after the loss sale — and make sure you did not buy any in the 30 days before it either.

Is a wash sale illegal?

No. It only means the loss is deferred, not deductible in that year. Brokers report wash sales routinely.

Does the wash sale rule apply to crypto?

As of 2026 the rule in section 1091 applies to stocks and securities; Congress has proposed extending it to digital assets. Check irs.gov for the current position.

Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-22.

Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.