What Is the Wash Sale Rule?

Updated for tax year 2025 (filed in 2026) · IRS-sourced

For tax year 2025, the wash sale rule can stop you from deducting an investment loss right away. If you sell stock or securities at a loss and buy substantially identical stock or securities within the IRS window, the loss is generally deferred instead of currently deducted.

Under IRC §1091, your loss is generally disallowed if you sell stock or securities at a loss and acquire substantially identical stock or securities during the 61-day period that starts 30 days before the sale and ends 30 days after it. The deferred loss is usually added to the basis of the replacement shares under 26 CFR § 1.1091-2.

How the wash sale rule works

A wash sale happens when you sell stock or securities at a loss and, within the 61-day period around that sale, you buy or contract to buy substantially identical stock or securities. The 61-day period includes the 30 days before the sale date, the sale date itself, and the 30 days after the sale date. This rule comes from IRC §1091 and 26 CFR § 1.1091-1.

If the rule applies, you generally cannot deduct that loss on your 2025 federal return yet. The loss is not gone forever in most ordinary cases; instead, it is deferred and usually carried into the basis of the replacement shares.

The rule applies to stock or securities. The IRS source provided here specifically uses the term 'substantially identical stock or securities,' which is the key standard for whether a replacement purchase triggers wash sale treatment.

What happens to the disallowed loss

When a loss is disallowed under the wash sale rule, the usual result is a basis adjustment to the replacement shares. Under 26 CFR § 1.1091-2, the disallowed loss is added to the basis of the newly acquired substantially identical stock or securities.

For example, if you bought stock for $100, sold it for $80, and then repurchased substantially identical stock for $90 within the wash sale window, the $20 loss is not currently recognized. Instead, the basis of the replacement share becomes $110 in the regulation's example.

That basis increase matters because it can reduce gain or increase loss when you later sell the replacement shares in a transaction that is not itself a wash sale.

How it affects your capital loss deduction

Because a wash sale loss is generally disallowed for the year of sale, it does not count as a currently deductible capital loss at that time. That can reduce the loss you are able to use on your 2025 return.

For taxpayers other than corporations, IRC §1211 generally limits net capital loss deductions to capital gains plus up to $3,000 of excess losses for the year, or $1,500 if married filing separately. A wash sale can matter before you even get to that annual capital loss limit because the wash sale amount is first disallowed.

In other words, if you expected a 2025 loss sale to offset gains or produce up to a $3,000 deduction against other income, the wash sale rule may delay that benefit if you repurchased substantially identical stock or securities too soon.

Practical points for tracking wash sales

Review all purchases and sales of the same or substantially identical stock or securities for the full 61-day period. That means checking transactions 30 days before the loss sale and 30 days after it, not just the sale date itself.

Keep records of purchase dates, sale dates, cost basis, proceeds, and any replacement transactions. Good records help you determine whether a loss is currently deductible or must be deferred into basis.

If only part of the position is replaced, only part of the loss may be disallowed. The IRS regulatory materials on coordination and examples show that partial disallowance can occur when only some substantially identical shares are acquired within the wash sale window.

Frequently Asked Questions

What exactly is the wash sale time period?

IRC §1091 and 26 CFR § 1.1091-1 say the rule applies if you acquire substantially identical stock or securities in the 61-day period beginning 30 days before the loss sale and ending 30 days after it.

Do I lose the deduction forever?

Usually no in the standard replacement-share situation. Under 26 CFR § 1.1091-2, the disallowed loss is generally added to the basis of the replacement stock or securities, which can affect your later gain or loss.

Does the wash sale rule apply only if I buy back after I sell?

No. IRC §1091 applies if you acquire substantially identical stock or securities within 30 days before or 30 days after the loss sale.

What if I only replace part of what I sold?

The IRS regulations indicate the loss can be partially disallowed when only part of the position is replaced within the wash sale window. The temporary coordination regulation example in 26 CFR § 1.1092(b)-1T shows partial disallowance principles.

How does this interact with the $3,000 capital loss limit?

IRC §1211 generally limits net capital losses for most individuals to capital gains plus up to $3,000 per year, or $1,500 if married filing separately. A wash sale loss is generally disallowed first, so it may not be available to count toward that annual deduction in 2025.

What property is covered by the rule in these IRS sources?

The sources provided here specifically describe wash sales of 'stock or securities.' IRC §1091 and 26 CFR § 1.1091-1 use that wording and focus on acquisitions of substantially identical stock or securities.