Knowledge Tree
wash-sale rule
Also known as: wash-sale rule, wash sale, wash sale rule, wash sale event
Facts (39)
Sources
How tax loss harvesting can help improve your investment returns troweprice.com 9 facts
procedureInvestors can use cash positions to temporarily increase holdings and then sell the original holding after 31 days to avoid the wash sale rule, provided they accept the risk of market unpredictability during that period.
claimThe IRS wash sale rule applies to related securities, such as call options on a stock, rather than just the stock itself.
claimIf an investor sells shares of a large-cap mutual fund at a loss on April 1, 2025, they cannot deduct that loss if they purchase additional shares of the same or a substantially identical large-cap mutual fund on or before May 1, 2025.
claimIn a wash sale, the disallowed loss increases the cost basis of the new holding, which delays tax efficiency benefits and generally defeats the purpose of a tax-loss harvesting transaction.
claimA wash sale event does not permanently prevent a deductible loss; it only prevents the deduction for that specific tax year.
claimThe IRS wash sale rule applies to related securities, such as call options on a stock, and also applies if the replacement purchase is made in a Traditional IRA or Roth IRA.
claimThe IRS wash sale rule applies even if the replacement purchase is made in a Traditional IRA or Roth IRA after selling the holding in a taxable account.
claimIf a wash sale event occurs, the IRS rules do not permanently prevent the investor from claiming a deductible loss.
claimTwo mutual funds that track the same benchmark but are advised by different investment advisors are generally not considered 'substantially identical' under IRS wash sale rules.
Wealthfront Tax-Loss Harvesting - Methodology research.wealthfront.com Jul 1, 2025 7 facts
claimThe risk of a wash sale increases with the number of rebalancing trades made as part of the ongoing management of an investment portfolio.
procedureWealthfront monitors all accounts it manages for each client to avoid transactions that might trigger a wash sale, and allows clients to link spousal accounts to prevent wash sales across accounts belonging to the same taxable household.
claimA wash sale does not eliminate the benefit of harvesting a loss, but temporarily reduces it by the amount of the wash sale; the disallowed loss from the wash sale is added to the cost basis of the new shares purchased, allowing the investor to claim the tax benefit when those new shares are eventually sold.
claimTo avoid violating the 'substantially identical' clause of the wash sale rule when applying tax-loss harvesting to a portfolio of index-based ETFs, investors must use two securities that track different indexes. Swapping an ETF with another that tracks the same index from a different issuer, such as Vanguard versus Schwab, violates the substantially identical rule.
claimA wash sale is defined as the sale of a security at a loss and the purchase of the same or a substantially similar security within 30 days of each other.
claimThe wash sale rule applies to all of an investor’s accounts, including IRAs and spousal accounts for joint filers, meaning that repurchasing a security sold for a loss within 30 days in any of these accounts can disallow the tax benefit.
claimThe IRS may disallow or defer a loss for current tax reporting purposes if a wash sale transaction occurs.
Tax Loss Harvesting for Enhanced Portfolio Efficiency | Envestnet envestnet.com 6 facts
claimThe wash sale rule prevents investors from deducting a loss if they purchase the same or substantially identical securities within 30 days of the sale.
procedureThe process of deploying tax-loss harvesting strategies consists of six steps: (1) Identify losses by evaluating portfolios for investment losses that can be harvested without disrupting the broader allocation; (2) Realize losses by executing trades to sell investments that no longer serve the portfolio; (3) Offset gains by applying realized losses to reduce exposure to capital gains taxes; (4) Decrease tax liability by using Envestnet’s tax overlay to deliver automated, risk-based strategies; (5) Reinvest by reallocating proceeds into similar assets without triggering the wash sale rule; (6) Monitor and adjust by tracking performance and rebalancing opportunities through a tax-aware lens using Envestnet’s integrated platform.
claimLosses realized in taxable accounts qualify for tax-loss harvesting if the security is not replaced by a substantially identical one within a 30-day period.
claimThe wash sale rule prevents investors from deducting a loss if they purchase the same or substantially identical securities within 30 days of the sale.
claimThe 30-day rule refers to a 61-day window, consisting of 30 days before and 30 days after a sale, during which purchasing a substantially identical security may disqualify the loss for tax purposes.
procedureThe process of executing tax-loss harvesting strategies involves six steps: (1) identify investment losses that can be harvested without disrupting the broader allocation, (2) execute trades by selling investments that no longer serve the portfolio to realize losses, (3) apply realized losses to reduce exposure to capital gains taxes, (4) use a tax overlay to deliver automated, risk-based strategies, (5) maintain market exposure by reallocating proceeds into similar assets while avoiding the wash sale rule, and (6) track performance and rebalancing opportunities through a tax-aware lens.
Here's how to make your tax-loss harvesting strategy do more for you privatebank.jpmorgan.com Aug 15, 2025 4 facts
claimWhen executing a tax-loss harvesting strategy, investors must be mindful to avoid violating the wash-sale rule when purchasing a replacement investment after selling a security at a loss.
procedureIf the wash sale loss disallowance rule is invoked, an investor must adjust the basis in the replacement security for the disallowed loss, which effectively defers the loss until the replacement security is sold.
referenceThe Internal Revenue Code, Section 1091, prevents an investor from claiming a tax loss if they purchase a security considered 'substantially identical' within a 30-day period before or after the loss trade date.
claimMonthly cash contributions to an investment account may trigger wash sale restrictions, which can reduce the opportunities available for tax-loss harvesting.
Capital Gains and Tax Loss Harvesting Explained - Mercer Advisors merceradvisors.com Oct 15, 2025 2 facts
procedureTo avoid violating the IRS wash sale rule while maintaining portfolio exposure, investors can purchase a similar, but not identical, investment after selling a security at a loss.
claimMercer Advisors provides tax preparation and planning services that include identifying tax loss harvesting opportunities, navigating the wash sale rule, optimizing asset location, and planning for capital gains distributions.
How Tax Loss Harvesting Could Help You Save on Taxes ellevest.com Apr 4, 2025 2 facts
claimFor married couples filing jointly, the wash sale rule applies to all accounts in the household, meaning an investor cannot repurchase the investment in any account held by themselves or their spouse.
claimThe wash sale rule prohibits harvesting losses if an investor sells an investment and then buys the same investment or one that is substantially identical to it, such as when a company issues new stock due to a reorganization.
Tax-loss harvesting explained | Vanguard investor.vanguard.com 2 facts
claimVanguard advises investors to review tax resources, including specific information for Vanguard funds, and to be familiar with tax basics such as the wash-sale rule, offsetting capital gains, state-specific rules, and transaction deadlines when planning to tax-loss harvest.
claimThe IRS wash-sale rule applies to purchases of substantially identical securities within the same account, as well as purchases of substantially identical securities in other accounts owned or controlled by the investor or their spouse or partner, including tax-deferred accounts like IRAs and 401(k) plans.
Three ways to extend tax benefits of a loss harvesting strategy privatebank.jpmorgan.com Nov 18, 2025 1 fact
procedureWhen replenishing an investment account after harvesting losses, investors must be mindful of the wash sale rule if they are purchasing the same or substantially identical securities in that account or other accounts owned by the same taxpayer.
Tax-Efficient Investing: Helping Keep Returns | Morgan Stanley morganstanley.com 1 fact
claimA 'wash sale' occurs when an investor sells or trades stock or other securities at a loss and then purchases substantially identical stock or securities within 30 days before or after the sale date.
Continuous tax-loss harvesting yields more potential for tax savings am.jpmorgan.com 1 fact
procedureA continuous tax-loss harvesting approach requires a diligent process consisting of three main components: (1) Analyze the cost vs. benefit of every trade to avoid realizing losses that may quickly reverse into gains and to prevent unnecessary portfolio turnover; (2) Control for wash sale violations by monitoring for the sale and repurchase of the same security within a 31-day period, as violations render the loss ineligible for tax purposes; (3) Incorporate up-to-date pricing data from the start of the trading day to ensure accurate loss-taking decisions.
How to Cut Your Tax Bill with Tax-Loss Harvesting | Charles Schwab schwab.com 1 fact
claimThe wash-sale rule states that if an investor sells a security at a loss and buys the same or a 'substantially identical' security within 30 days before or after the sale, the loss is typically disallowed for current income tax purposes.
Managing Your Retirement Portfolio - Moran Wealth Management moranwm.com Dec 22, 2025 1 fact
claimTax-loss harvesting may offset realized gains, but it is subject to specific rules such as the wash-sale rule and timing constraints.
Tax loss harvesting: What it is and how to explain it to clients im.natixis.com Jun 30, 2025 1 fact
claimThe IRS wash-sale rule prohibits an investor from claiming a loss if they purchase the same investment or any investment the IRS considers 'substantially identical' within 30 days before or after selling the original investment at a loss.
Personal Tax and Wealth Planning for Year-End: Five Key Strategies claconnect.com Nov 25, 2025 1 fact
claimThe wash sale rule disallows investors from claiming a tax loss if they purchase the same or a substantially similar security within 30 days of triggering the loss.