For US federal taxes, a wash sale can defer a loss when a taxpayer sells stock or securities at a loss and acquires substantially identical stock or securities within the relevant window. The window extends 30 days before and 30 days after the loss sale. IRS Publication 550

The result is not always simply “the loss comes back later.” Replacement purchases in certain retirement accounts can have a different basis outcome, and matching across lots and accounts matters.

A Basic Taxable-Account Example

Assume you buy 100 shares for $180 each and sell them for $170 each, ignoring fees. That creates a $1,000 loss before adjustments. If a matching replacement purchase in a taxable account is made at $172 and triggers the wash-sale rule, the disallowed loss is generally added to the replacement basis: $182 per share in this simplified example.

Partial replacements require matching the relevant quantities. Keep lot-level records rather than treating every sale and purchase as one aggregate position.

Look Beyond One Broker Statement

Your own activity across accounts can matter even when a broker's information form does not capture every interaction. Include automatic reinvestments and retirement-account purchases in the review. A crypto-related security is still a security; its underlying exposure does not automatically exempt it.

Publication 550 is the starting point for the securities rules. Ask for advice when deciding whether different securities are substantially identical rather than relying on an internet list of “safe substitutes.”

December 31 Does Not Reset the Window

Closing positions at year end does not by itself resolve wash sales. A purchase in January may still fall within the post-sale window for a December loss. Earlier replacement lots and carried basis also need reconciliation.

Make a year-end review calendar that extends into the following year. Do not delete the trade history once the December statement is downloaded.

Elections and Other Contracts

A valid Section 475 election changes the treatment of covered trading securities, but does not exempt every investment in the household. IRS Topic 429

Other instruments can have separate rules. Do not switch to futures solely to simplify a wash-sale calculation without understanding contract risk and tax classification.

Frequently Asked Questions

Is a disallowed loss always recoverable later?

No universal promise is appropriate. The replacement account, instrument and applicable basis treatment matter, particularly for IRA interactions.

Does selling everything on December 31 solve it?

No. Later purchases within the applicable window can still matter.

Can I rely entirely on the broker's 1099-B?

Use it as a starting point and reconcile the activity it may not capture, including relevant cross-account transactions.

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