🧼 Wash Sale Rule Planner & Basis Adjuster
Avoid surprise IRS tax penalties. Calculate your exact 61-day wash sale window, identify disallowed capital losses, and track adjusted cost basis on replacement lots.
Wash Sale Determination
Wash Sale TriggeredIRS 61-Day Wash Sale Timeline Map
Visual breakdown of the 30-day lookback, sale event, 30-day restriction zone, and safe re-entry harbor.
Buys here before sale trigger wash sales
Loss is realized
Repurchasing disallowed here
Safe to repurchase freely
IRS Code Section 1091 & Tax-Loss Harvesting Rules
The wash sale rule was created by the IRS to prevent taxpayers from claiming an artificial capital loss deduction while simultaneously retaining economic ownership of the exact same security. If you realize a capital loss and purchase substantially identical stock or call options within 30 days before or after, you cannot deduct the loss on your current Form 1040 Schedule D.
How Cost Basis Adjustment Protects You
While frustrating on your current year taxes, the disallowed loss is not forfeited. It increases your replacement shares' cost basis. For instance, buying back at $115 with a $40 disallowed loss sets your new cost basis to $155. When you eventually sell at $160, you report only a $5 gain instead of a $45 gain.
The 31-Day Safe Re-entry Rule
To successfully claim your tax deduction while reinvesting in the broader market, professional investors swap the losing asset for an ETF in a similar sector (e.g., selling Microsoft at a loss and buying QQQ), or wait exactly 31 calendar days before repurchasing the original stock.
Frequently asked questions
What is the IRS 61-day wash sale window?
The IRS wash sale rule covers a 61-day span: the 30 calendar days before the sale date, the actual date of the sale, and the 30 calendar days after the sale date. If you buy substantially identical stock or options within this window, the tax loss is disallowed for the current tax year.
Is the disallowed loss permanently lost?
No, in taxable brokerage accounts the loss is deferred rather than lost. The disallowed loss dollar amount is added directly to the cost basis of your replacement shares, increasing your basis so you pay less tax (or report a larger loss) when you eventually sell the replacement position.
What is holding period tacking under the wash sale rule?
When a wash sale occurs, the holding period of the original shares you sold at a loss is added (tacked) onto the holding period of the replacement shares. This can help the replacement shares qualify sooner for favorable long-term capital gains tax rates.
Can I harvest tax losses by switching between SPY and VOO?
While tax advisors debate whether SPY and VOO (both tracking the S&P 500) are 'substantially identical', many institutional investors safely harvest losses by swapping between closely correlated but distinct indices, such as selling an S&P 500 fund and purchasing a Total Stock Market fund (VTI) or Russell 1000 fund.
What happens if I sell at a loss in a taxable account and buy back inside an IRA?
Under IRS Revenue Ruling 2008-5, if you sell stock at a loss in a taxable brokerage account and purchase substantially identical shares inside an IRA (Traditional or Roth) within 30 days, the loss is permanently disallowed and cannot even be added to your IRA basis.