Wash-sale rule (IRC Section 1091)

The wash-sale rule under IRC Section 1091 disallows a tax-loss deduction when you purchase the same or substantially identical security within 30 days before or 30 days after selling at a loss. The disallowed loss is added to the basis of the replacement shares, effectively deferring the loss to the eventual sale of the replacement.

The 61-day window

The wash-sale window is 61 days total: 30 days before the sale, the sale day, and 30 days after.

What counts as "substantially identical"

The IRS has never published a definitive list. Practitioner consensus:

• Same ticker = substantially identical (clearly)
• Different share classes of the same fund (e.g., VFIAX vs VOO) = substantially identical
• Two ETFs tracking the same index = generally substantially identical
• Two ETFs tracking different but similar indexes = generally NOT substantially identical
• Two index funds from different issuers tracking different indexes (VTI vs SCHB) = generally NOT substantially identical

Mutual funds + ETFs across accounts

The wash-sale rule applies across all your accounts — including your IRA. So selling at a loss in taxable and buying the same fund in your IRA still triggers the wash sale. Worse: the disallowed loss doesn't even add to your IRA basis (it just vanishes).

Cryptocurrency

As of current law, the wash-sale rule does NOT apply to cryptocurrency (cryptos are property, not securities). This may change with future legislation.

Spousal accounts

Wash-sale rule applies between spouses. Sale in your account + purchase in your spouse's account = wash sale.

Modern automated platforms

Modern brokerages and RIA platforms typically flag wash-sale risk before harvest trades. The Vega TLH opportunity finder checks the 30-day window across all known accounts before flagging a position as harvestable.