What Are Wash Sale Rules?

A wash sale occurs when you sell a security at a loss and buy the same or "substantially identical" security within 30 days before or after the sale. When this happens, the IRS disallows the tax loss — you can't deduct it. The disallowed loss is added to the cost basis of the replacement shares, so you'll get the tax benefit eventually when you sell those shares. This rule prevents investors from creating paper losses while maintaining their position. Cryptocurrency is currently not subject to wash sale rules (though this may change).