Wash-sale 30-day rule

The wash-sale 30-day rule is the core mechanism of the wash-sale restriction. If you sell a security at a loss and purchase a substantially identical security within 30 days before or 30 days after the sale, the loss is disallowed and added to your cost basis of the new purchase. This 61-day window (30 before + 30 after + the sale date) prevents investors from harvesting losses while maintaining identical market exposure.

Timeline example

You sell a stock at a loss on January 10. The 30-day window runs:

• 30 days before: December 11 to January 9
• Sale date: January 10
• 30 days after: January 11 to February 9

If you buy the same or substantially identical security any day from December 11 through February 9, wash-sale is triggered and the loss is disallowed.

Safe to repurchase: February 10 or later.

Why the extended window?

The 30-day rule extends both before and after the sale to prevent two strategies:

Pre-loss purchasing: Without the pre-sale window, you could buy, immediately sell at a loss, and repurchase days later, claiming a tax loss while never losing market exposure.

Post-loss purchasing: Without the post-sale window, you could sell and wait just one day to repurchase, achieving the same result.

The 30+30 window (plus the sale day) prevents both tricks.

What counts as a purchase?

Purchases that trigger wash-sale include:

• Buying shares in the same stock
• Buying call options on the stock (or buying shares via exercising a call)
• Dividend reinvestment during the window (if you sell, then the dividend is paid and reinvested, during the 30-day window)

Purchases that do not trigger wash-sale:

• Receiving a dividend (not a purchase)
• Exercising a put option (short sale, not relevant for wash-sale)
• Receiving stock as compensation

Counting from settlement date or trade date?

The IRS measures the 30 days from the settlement date of the sale, not the trade date. For US stocks, settlement is T+2 (trade date plus two business days). However, most brokers and tax software measure from the trade date for simplicity.

Best practice: Assume the wash-sale window is measured from the trade date and add 2 business days to be safe.

Substantially identical for ETFs and mutual funds

This is where the rule gets murky. If you sell an S&P 500 index fund at a loss and buy a different S&P 500 index fund (same holdings, different issuer), is it substantially identical?

The IRS has not ruled explicitly. The safe approach: wait 30 days before switching index funds, even if they track the same index.

A possible strategy: Sell SPY (S&P 500 ETF), and buy QQQ (Nasdaq-100 ETF) or a different asset class fund to maintain diversification while sidestepping the same holdings. This is not officially blessed but is common practice.

Wash-sale across accounts and spouses

The wash-sale rule applies per taxpayer, not per account. If you sell a stock in your own taxable brokerage account, you cannot repurchase in your IRA or another taxable account without triggering wash-sale.

Spousal strategy: If your spouse sells a stock at a loss, your spouse’s account can purchase a different security, and you can purchase the original stock in your account, both maintaining exposure without triggering wash-sale. However, the IRS scrutinizes coordinated spousal trades; be cautious.

Broker tracking

Most brokers automatically flag wash-sale transactions and add the disallowed loss to the new cost basis. If you do not explicitly track, your broker will likely catch it on Form 1099-B.

See also