Wash sale

What is Wash sale?

The wash-sale rule under section 1091 disallows a loss on the sale of stock or securities when you buy substantially identical stock or securities within 30 days before or after the sale. Crypto held directly is property, not a security, so as of September 2026 the rule does not apply to it, although legislation to change that is pending. The rule does apply to spot crypto ETFs, which are securities.

Why it matters on your return

The wash-sale gap is the single biggest structural advantage crypto investors have over stock investors: a coin can be sold at a loss and repurchased the same day, harvesting the loss while keeping the position. It is also the most likely rule to change. H.R. 9172, introduced in June 2026, would extend section 1091 to digital assets, and a Senate draft would reach tax years after 2025 if enacted, so the strategy has to be checked against current law every time it is used.

Example

How it works

1. For stock and securities, the 61-day window. A loss is disallowed if you buy the same or a substantially identical security within 30 days before or 30 days after the sale. The disallowed loss is added to the basis of the new shares.
2. For crypto held directly, no window. Because the IRS classifies crypto as property under Notice 2014-21, section 1091 does not reach it. A loss on ETH sold and repurchased a minute later is currently allowed.
3. For crypto ETFs, the window applies. IBIT, FBTC, GBTC and similar funds are securities. Selling IBIT at a loss and rebuying within 30 days is a wash sale.
4. Economic substance still matters. A round trip with no real change in position invites a challenge under the economic substance doctrine even where section 1091 does not apply. Holding the repurchase for a meaningful period, or buying a correlated but different asset, is the conservative approach.
5. Watch the calendar. If H.R. 9172 or a successor is enacted with a retroactive effective date, losses harvested this year could be disallowed on next year's return.

Common mistakes

• Applying the rule to crypto out of caution. Voluntarily disallowing a loss the law allows costs real money; the rule is what it is until Congress changes it.
• Ignoring it for crypto ETFs. Brokers report wash sales on ETF shares on Form 1099-B, and the IRS matches them.
• Harvesting with no substance. Same-second round trips are legal today but weak under the economic substance doctrine if examined. Wait, or buy something correlated.
• Forgetting the lot rule. Harvesting a loss means selling a specific high-basis lot, identified at the time of sale within the wallet. FIFO may sell a low-basis lot and produce a gain instead.
• Not checking the law before year end. The rule can change with a bill signing. Confirm in December before executing.

Frequently asked questions

Does the wash-sale rule apply to crypto?

Not to crypto held directly, as of September 2026. The IRS treats crypto as property, and section 1091 covers stock and securities. Pending legislation (H.R. 9172) would extend it; confirm the status before harvesting.

Can I sell crypto at a loss and buy it back immediately?

Under current law, yes, and the loss is allowed. The conservative approach is to wait a short period or buy a correlated asset, because a round trip with no economic change can be challenged on substance grounds.

Does the wash-sale rule apply to Bitcoin ETFs?

Yes. Spot crypto ETF shares are securities, so selling IBIT at a loss and rebuying within 30 days is a wash sale even though holding Bitcoin directly is not.

What happens to a disallowed wash-sale loss?

It is added to the cost basis of the replacement shares, so you recover it when you eventually sell those shares outside the window.

Will the wash-sale rule apply to crypto in 2027?

Unknown. H.R. 9172 (June 2026) would extend the rule to digital assets and is pending in the House; a Senate draft would apply to tax years after 2025 if enacted. Any harvesting plan should be re-checked against the law at the time.

What to do next

Loss harvesting in crypto is a year-end decision made lot by lot, within each wallet, against the law as it stands in December. Crypto tax planning at Gordon Tax models which lots to sell, what the harvested loss is worth against your gains, and whether the repurchase should wait.

Related terms

• Tax loss harvesting
• Capital gain

Last reviewed September 17, 2026. Tax rules change; confirm current law before acting.