Wash Sale Rule: Disallowed Loss Reference Table
Direct answer: The wash sale rule (IRC Section 1091) disallows a capital loss if you buy the same or substantially identical security within 30 days before or after the sale at a loss. The 61-day window covers 30 days before through 30 days after the sale. Repurchases in IRAs permanently disallow the loss rather than deferring it.
Wash sale rule: common scenarios
This table covers common scenarios. When a loss is disallowed within taxable accounts, it is added to the cost basis of the replacement security (loss deferred, not lost). The IRA scenario is different: the loss is permanently disallowed.
| Scenario | Disallowed? | Reason |
|---|---|---|
| Sell stock at loss, buy same stock 20 days later | Yes | Repurchase within 30 days after sale |
| Sell stock at loss, bought same stock 20 days before sale | Yes | Purchase within 30 days before sale |
| Sell stock at loss, buy substantially identical stock in an IRA within 30 days | Yes (permanently) | IRA purchase triggers wash sale; disallowed loss cannot be added to IRA basis |
| Sell ETF at loss, buy different ETF tracking same index | Generally no | Typically not substantially identical; seek tax advice for your situation |
| Sell stock at loss, spouse buys same stock same day | Yes | Spousal accounts treated as same taxpayer |
| Sell stock at loss, hold 31 days, no repurchase | No | Outside 61-day window; loss is deductible |
| Sell stock at loss, buy call option on same stock within 30 days | Likely yes | Options on the same stock may be substantially identical; consult a tax advisor |
Source: IRS Publication 550: Investment Income and Expenses. Last verified: September 2026. Verify rules at IRS.gov before making decisions; this table is educational and not tax advice.
How the basis adjustment works in taxable accounts
When a wash sale occurs within a taxable account, the disallowed loss is added to the cost basis of the replacement shares. The holding period of the replacement shares includes the holding period of the shares sold. This means the loss is deferred rather than permanently lost. In an IRA, no basis adjustment is possible because IRA basis rules are separate, so the loss is permanently forfeited.
Frequently asked questions
What is the wash sale rule?
The wash sale rule under IRC Section 1091 disallows a capital loss if you buy the same or substantially identical security within 30 days before or after the sale that generated the loss. The disallowed loss is added to the cost basis of the replacement security in a taxable account, deferring rather than permanently eliminating the tax benefit.
Does the wash sale rule apply to IRAs and 401(k)s?
Yes. If you sell a security at a loss in a taxable account and buy the same security in an IRA within the 61-day window, the loss is permanently disallowed because the disallowed loss cannot be added to IRA basis. This is a critical distinction from wash sales within taxable accounts, where the loss is merely deferred via a basis adjustment.
What does substantially identical mean?
Substantially identical means securities that are interchangeable in economic terms. The same stock is clearly identical. An individual stock and a related call option may be substantially identical in some circumstances. Two different ETFs tracking the same index may or may not be substantially identical; the IRS has not provided definitive guidance on ETF pairs. Consult a tax advisor for your specific situation.