Wash sale rule: the 61-day window, basis adjustment and traps

Selling an investment at a loss usually has one consolation: the loss can reduce your tax bill. The wash sale rule removes that consolation when you sell at a loss and buy the same thing back too soon. Congress wrote it to stop investors from booking a tax loss while keeping essentially the same position, and the IRS applies it mechanically, whether or not saving tax was your intention.

The rule lives in section 1091 of the Internal Revenue Code. In short: if you sell stock or securities at a loss and, within 30 days before or after the sale, you buy substantially identical stock or securities, you cannot deduct the loss that year. The loss is not destroyed in most cases; it is added to the cost basis of the new shares and recovered when you finally sell them. But the timing shift, the exceptions and the reporting gaps catch many investors by surprise.

This page explains the 61-day window, works through the basis adjustment step by step, and covers the traps that matter for tax year 2026: partial repurchases, options, IRA purchases, your spouse's account, and what your broker's Form 1099-B does and does not catch. It is general education, not tax advice.

The rule in one paragraph

IRS Publication 550 lists four triggers. A wash sale occurs when you sell or trade stock or securities at a loss and, within 30 days before or after the sale, you:

1. buy substantially identical stock or securities;
2. acquire substantially identical stock or securities in a fully taxable trade;
3. acquire a contract or option to buy substantially identical stock or securities; or
4. acquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.

A purchase by your spouse or by a corporation you control also counts. The rule applies to investors, not to securities dealers acting in the ordinary course of their business. It also applies to losses on options and contracts to buy or sell stock, but not to commodity futures or foreign currency.

The 61-day window

The window runs 30 calendar days before the sale, the sale day itself, and 30 calendar days after: 61 days in total. Calendar days, not business days, so weekends and holidays count. A purchase anywhere inside it can trigger the rule, including one made before the losing sale, which surprises investors who think only of buying back afterward.

For a sale on Monday, March 2, 2026, the window runs from Saturday, January 31 to Wednesday, April 1, 2026. A purchase on April 2 or later, or on January 30 or earlier, is outside it. The window also ignores the calendar year: a loss sale on December 20, 2026 followed by a purchase on January 10, 2027 is still a wash sale, and the loss cannot be used on the 2026 return.

How the basis adjustment works

When a loss is disallowed, Publication 550 says to add it to the cost of the new stock. The result is your basis in the replacement shares. Your holding period for the new shares also includes the time you held the old ones.

Because the deferred loss rides along with the new shares, a series of wash sales can keep pushing a loss forward. That matters most at year-end: a loss you planned to use against 2026 gains, or against up to $3,000 of ordinary income ($1,500 if married filing separately), will not appear on your 2026 return if the replacement shares are still held on December 31.

The holding-period carryover can also help. In the example, the replacement shares start life 56 days old, so they reach the "more than one year" long-term threshold 56 days sooner than a fresh purchase would.

Partial repurchases

If you buy back fewer shares than you sold, only part of the loss is disallowed. Pub 550 says to match the shares bought with an equal number of the shares sold, in the order they were bought.

Small purchases count too. An automatic dividend reinvestment into the same stock or fund within the window is a purchase of substantially identical shares, so it can disallow a slice of a loss you took on that holding.

What "substantially identical" means

There is no bright-line test. Publication 550 tells you to consider all the facts and circumstances, and gives some guidance:

• Stock of one corporation is ordinarily not substantially identical to stock of another, so selling one bank stock and buying a different bank generally avoids the rule.
• A company's bonds or preferred stock are ordinarily not substantially identical to its common stock, unless they are convertible into the common and trade in line with it; Pub 550 lists the features that make convertible preferred identical.
• In a reorganization, predecessor and successor stock may be substantially identical.

The hard cases are funds. Two ETFs tracking the same index from different issuers have different CUSIPs and legal structures but nearly identical holdings. The IRS has not issued a bright-line rule on them (not independently verified as of October 2026), so investors and advisers take different views. Funds that track different indexes, such as a total market fund versus an S&P 500 fund, are generally treated as a lower-risk swap, but that is an interpretation, not an IRS safe harbor.

Options and short sales

Buying calls. Acquiring "a contract or option to buy" substantially identical stock is one of the four triggers. Selling a stock at a loss and buying a call on it within 30 days is a wash sale.

Losses on options themselves. The rule applies to losses from options and contracts to acquire or sell stock, so closing an option at a loss and reopening the same option in the window can trigger it.

Selling puts. A short put is not a contract to buy from your side unless it is exercised. Whether writing a deep in-the-money put after a loss sale is treated as acquiring an option to buy depends on the facts (not independently verified as of October 2026); consult a tax professional before relying on either view.

Short sales. The rule also applies to a loss on closing a short sale if you sell, or sell short, substantially identical stock within 30 days before or after the short sale is complete. Pub 550 has specific rules on when a short sale counts as complete.

The IRA trap: Rev. Rul. 2008-5

Selling a stock at a loss in a taxable account and buying it in your IRA or Roth IRA within the window is a wash sale. Revenue Ruling 2008-5 goes further: the loss is disallowed and your basis in the IRA is not increased. Because IRA assets have no basis that matters for capital gains, the loss is effectively gone for good, not deferred.

The same logic is why automatic contributions matter. If your IRA buys the same fund every month, a loss sale of that fund in a taxable account can be caught by an IRA purchase you did not even think of as a trade. Retirement-account basics are in Retirement accounts explained: 401(k), IRA, Roth and 2026 limits.

What your 1099-B does and does not catch

Brokers report disallowed wash-sale losses in box 1g of Form 1099-B. The 2026 instructions require that reporting only when both the sale and the purchase occur in the same account, for covered securities with the same CUSIP number. That leaves many wash sales invisible to the broker:

• a repurchase in a different account, at the same or another firm;
• a purchase in your IRA, or by your spouse;
• a call option on the stock;
• a different fund or security that is still substantially identical.

The rule applies regardless. You report wash sales on Form 8949 with adjustment code "W", including ones your broker didn't flag, which means you need your own record of purchases across every account in the household.

Wash sales compared with similar rules

The last row is not a tax rule at all, but it is a common source of confusion: both involve "selling and buying back," and both have a restricted period. See Cash account violations: good faith, free-riding and liquidation.

How Finabase helps

Finabase does not prepare tax forms or detect wash sales, and it is not a substitute for your broker's records or a tax professional. A Finabase portfolio does keep a dated log of each buy and sell with average cost and realized gains, which helps you spot a repurchase within 30 days of a loss sale, including across brokers if you record trades from every account in one place. If you are considering replacing a fund with a different one, the comparison tool charts two or more symbols' performance side by side, and a symbol page shows each fund's details.

Frequently asked questions

How long do I have to wait to buy back a stock after selling at a loss?

More than 30 days after the sale. For a sale on March 2, 2026, the first purchase date that avoids the rule is April 2, 2026. You also must not have bought substantially identical shares in the 30 days before the sale.

Is a wash-sale loss gone forever?

Usually not. The disallowed loss is added to the basis of the replacement shares and reduces your gain, or increases your loss, when you sell them. The exception is a repurchase in an IRA or Roth IRA, where Rev. Rul. 2008-5 means the loss is not added to any basis.

Does the wash sale rule apply to gains?

No. It only disallows losses. If you sell at a gain and buy back the next day, the gain is taxable as usual.

Does my spouse buying the stock trigger a wash sale?

Yes. Publication 550 says that if you sell stock and your spouse buys substantially identical stock within the window, you have a wash sale, even in a separate account.

Will my broker tell me about every wash sale?

No. Brokers report wash sales on Form 1099-B only when the sale and repurchase are in the same account and involve covered securities with the same CUSIP. You are responsible for the rest.

Summary

The wash sale rule in IRC §1091 disallows a loss when you buy substantially identical stock or securities, or an option to buy them, within 30 days before or after the losing sale. The disallowed loss moves into the basis of the replacement shares, and the old holding period carries over, so in most cases the deduction is postponed rather than lost. The exception is a purchase in an IRA or Roth IRA, which under Rev. Rul. 2008-5 forfeits the loss. Because brokers only flag same-account, same-CUSIP wash sales, keeping your own record of purchases across every account, including your spouse's, is the only reliable way to apply the rule for tax year 2026.