can you sell and rebuy stock — wash‑sale guide

This comprehensive guide answers “can you sell and rebuy stock” in U.S. taxable accounts: it explains the IRS wash‑sale rule, what counts as “substantially identical,” cross‑account and IRA pitfall...

2026-01-10 02:11:00

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Selling and Rebuying Stock (Wash‑Sale Considerations)

Can you sell and rebuy stock is a common question for U.S. investors who want to harvest losses, rebalance, or manage positions. This guide explains how the IRS wash‑sale rule affects those trades, which securities are covered, how losses are adjusted, cross‑account and IRA traps, practical avoidance tactics, and reporting requirements. Read on to learn clear, actionable principles so you can plan trades with tax awareness while keeping investment goals front of mind.

Overview

Investors often ask “can you sell and rebuy stock” because they seek tax advantages (tax‑loss harvesting), want to quickly reestablish market exposure, or need to rebalance portfolios. Selling to realize a loss can offset gains and reduce taxable income, but U.S. tax rules limit the immediate repurchase of substantially identical securities to prevent manufactured losses. Understanding the wash‑sale rule and its mechanics helps investors avoid unintended tax disallowance and manage trade timing, substitutes, and reporting.

As of 2026-01-21, according to major tax guidance providers (TurboTax, Fidelity, Charles Schwab, Kiplinger, and Motley Fool), the wash‑sale rule remains a central consideration for taxable brokerage accounts and requires careful tracking across accounts and instruments.

The Wash‑Sale Rule — Definition and Purpose

The IRS wash‑sale rule disallows a loss on the sale of a security if you buy a "substantially identical" security within 30 days before or after the sale date. The rule is designed to prevent taxpayers from creating tax losses by selling and promptly repurchasing the same or nearly identical investment, thereby preserving economic position while claiming a tax deduction.

When investors ask “can you sell and rebuy stock,” the key tax limitation is this disallowance: the immediate repurchase of substantially identical shares will typically defeat the loss for current tax reporting and instead adjust the cost basis of the replacement shares.

Time window (30‑day before/after; 61‑day effective period)

The wash‑sale timeline spans 61 days in practical terms: 30 days before the sale, the day of sale, and 30 days after the sale. If you purchase substantially identical securities during any day in that window, a loss on the sale falls under the wash‑sale rule and is disallowed for that tax year (but see cost‑basis carryover below).

Key points:

The 30‑day periods are inclusive; purchases made 30 days before or after the sale count.
The effective period is commonly referred to as 61 days because it tallies 30 days before + day of sale + 30 days after.
Wash‑sale determination looks at the date of purchase relative to the sale and not settlement timing in most taxpayer discussions, though cost‑basis reporting depends on trade/settlement conventions.

“Substantially Identical” — meaning and ambiguity

The statute does not precisely define “substantially identical,” so interpretation relies on IRS guidance, rulings, and common practice. In practice, substantially identical generally includes:

The same stock (same issuer, same CUSIP) or the same series of a mutual fund.
Nearly identical options or contracts to acquire the same security (e.g., deep in‑the‑money calls that effectively substitute for ownership).
In many cases, identical ETFs tracking the same fund share class or ticker.

Gray areas exist:

Two ETFs that track similar indexes may or may not be substantially identical depending on tracking methodology, holdings overlap, and issuer differences.
Different share classes of the same mutual fund are often treated as substantially identical because they represent proportional ownership in the same pool.
Corporate reorganizations, mergers, or spin‑offs introduce complexity; IRS rulings and broker cost‑basis practices determine treatment.

Because of ambiguity, conservative investors treat securities with high economic similarity as substantially identical for wash‑sale purposes unless clear guidance indicates otherwise.

Securities Covered

The wash‑sale rule applies broadly to "securities" in taxable accounts. Typical covered instruments include:

Individual stocks and common shares.
Exchange‑traded funds (ETFs) and mutual funds (especially identical share classes).
Bonds and many fixed‑income securities when sold at a loss and repurchased within the window.
Options and other derivatives that are effectively substitutions for equity ownership.

Custodians and brokers commonly use identifiers such as CUSIPs to determine identity. However, tax responsibility ultimately rests with the taxpayer: brokers may only track wash sales within a single account, not across all accounts you own.

Tax Consequences and Mechanics

When a wash sale is triggered, the immediate tax benefit of the loss is disallowed. Instead of deducting the loss on your tax return for the year of sale, the disallowed loss is added to the cost basis of the replacement shares you purchased. This means:

The loss is not permanently lost; it is deferred because the basis of the new shares is increased by the amount of the disallowed loss.
The holding period of the original shares generally tacks onto the replacement shares, which affects whether a future sale results in short‑term or long‑term gain or loss.
When the replacement shares are later sold in a transaction not subject to a wash rule, the previously disallowed loss will reduce the taxable gain (or increase a loss) at that future sale.

These mechanics answer a frequent version of “can you sell and rebuy stock” by showing that while repurchasing is allowed, immediate repurchase at a loss usually defers — rather than eliminates — the tax benefit.

Cost‑basis adjustment and holding period

Example mechanics:

You bought 100 shares of XYZ at $50 (basis $5,000). You sell all 100 shares at $40 ($4,000), realizing a $1,000 loss. Within 10 days you repurchase 100 shares at $41. Because the repurchase occurred within the 30‑day window, the $1,000 loss is disallowed and added to the new shares’ basis: new basis = $41 * 100 + $1,000 = $5,100 ($51 per share). Your holding period for the repurchased shares includes the prior holding period, which matters for long‑term vs short‑term determination on a later sale.

This is why selling and repurchasing is legal in form but tax‑sensitive in substance.

Cross‑account and Related‑party Rules

A common pitfall arises when purchases occur in different accounts. The wash‑sale rule applies across all accounts owned by the taxpayer — including external brokerages and taxable accounts — and can also apply to related parties.

Key points:

Purchases in different taxable brokerage accounts (even at different brokerages) can trigger a wash sale.
A purchase in an IRA or Roth IRA after a loss in a taxable account can create a wash sale with particularly unfavorable results because the disallowed loss is added to the IRA basis in a way that does not produce an equivalent tax benefit. Revenue Ruling 2008‑5 shows the IRS position that losses disallowed by a wash sale cannot be added to the basis of IRA holdings in a way that preserves the tax benefit — in practice, that often permanently removes the tax loss.
Transactions by a spouse in a community property or married filing jointly context can also trigger wash‑sale treatment depending on facts; consult a tax advisor for married taxpayers.

Brokers often track wash sales only within an individual account. That means the broker’s 1099‑B may report wash sales inside that account but will not capture cross‑broker or IRA purchases. Taxpayers are responsible for identifying and reporting cross‑account wash sales on their tax returns.

Purchases inside IRAs and Roth IRAs

This is a significant trap: if you sell a security at a loss in a taxable account and then purchase the same or substantially identical security inside an IRA (traditional or Roth) within the 30‑day window, the loss is disallowed and typically lost for tax purposes. The disallowed loss is not effectively transferred to your IRA in a way that preserves the deduction. Therefore, avoid repurchasing substantially identical securities inside retirement accounts in the wash window if you intend to preserve tax‑loss benefits.

Special Situations and Triggers

Several scenarios commonly trigger wash‑sale implications or require special attention:

Dividend reinvestment plans (DRIPs): Automatic reinvestment of dividends may buy shares within the 30‑day window and cause a wash sale. Monitor DRIP dates when harvesting losses.
Partial repurchases: If you sell 100 shares at a loss and repurchase 50 within the window, the disallowed loss is proportional. A pro‑rata calculation applies to determine the disallowed portion.
Options and contracts: Buying call options that effectively replace stock ownership or selling stock and acquiring near‑identical calls may create wash‑sale scenarios.
Corporate actions: Mergers, spinoffs, and reorganizations can change what is "substantially identical." Seek guidance when corporate action affects identity.
Selling for a gain then repurchasing: The wash‑sale rule only disallows losses. If you sell at a gain and immediately repurchase, there’s no wash sale; however, you should consider the tax consequences of realizing the gain.

Practical Examples

Example A — Straight wash:

You sell 100 shares of Company A at a $2,000 loss. Ten days later you buy 100 shares of Company A. The $2,000 loss is disallowed and added to the basis of the new shares.

Example B — Partial repurchase:

You sell 200 shares at a loss and buy 50 shares within the wash window. A portion of the loss equal to the proportion of replacement shares (50/200 = 25%) is disallowed and added to the basis of the 50 replacement shares.

Example C — Same‑day sale with gain:

You sell 100 shares at a gain and buy 100 shares immediately; no wash‑sale issue because the sale was not at a loss. Tax consequences relate to the realized gain.

Example D — Cross‑account purchase:

You sell all shares of Fund X at a loss in Brokerage A. Within 20 days you buy Fund X in Brokerage B. Even if each broker’s 1099‑B does not mark a wash sale, the IRS expects you to report it; the loss is disallowed across accounts.

Example E — IRA repurchase trap:

You sell Stock Y for a loss in a taxable account. Within 15 days you buy Stock Y in your Roth IRA. The loss will be disallowed and often permanently lost for tax purposes because the basis in the IRA cannot be adjusted to capture the disallowed loss.

How to Avoid or Manage Wash‑Sale Risks

Many investors legitimately want to preserve market exposure while harvesting tax losses. Common techniques include:

Waiting at least 31 days before repurchasing the same or substantially identical security. This is the simplest and safest approach.
Buying a similar but not substantially identical security immediately (for example, a sector ETF with different holdings or a different index fund). This maintains exposure while usually avoiding wash‑sale classification.
Using tax‑lot selection to sell lots with the highest basis or desired holding period to target short‑term vs long‑term outcomes.
Implementing substitution strategies with careful selection to avoid being "substantially identical." This requires judgment because the IRS standard is ambiguous.
Coordinating across accounts and disabling automatic DRIPs temporarily when harvesting losses.

Tradeoffs exist: waiting 31 days exposes you to market movement risk; substitutions may not perfectly replicate exposure. Evaluate investment objectives and tax tradeoffs together.

Substitutes and “tax‑efficient” replacements

When asking “can you sell and rebuy stock,” many investors choose replacements to avoid the wash rule:

Replace single stock with a diversified ETF that covers the same sector but tracks a different index or employs a different weighting. This often is not "substantially identical."
Swap between ETFs that target the same sector but are managed by different providers and track different indexes. Because ETF holdings differ, they are less likely to be treated as substantially identical — but caution is warranted if the ETFs track the identical index.
Use inverse or leveraged products only with awareness: these are rarely appropriate as long‑term replacements and have distinct tax and risk profiles.

Always document your rationale and recognize ambiguity: when in doubt, consult a tax professional.

Tax‑loss harvesting best practices

Maintain detailed trade records and a calendar for 30‑day windows.
Coordinate trades among all brokers and retirement accounts to avoid inadvertent cross‑account wash sales.
Check your brokerage cost‑basis settings and tax‑lot accounting method (FIFO, Specific Identification, etc.). Specific identification allows targeted lot selection to optimize tax outcomes.
For DRIPs, temporarily suspend reinvestment when you plan to harvest a loss.
Engage a tax advisor for large or complex positions and when considering IRA repurchases.

Cryptocurrency and Non‑Applicability (where relevant)

A frequent modern question is whether the wash‑sale rule applies to cryptocurrency. As of 2026-01-21, major tax guidance providers note that traditional wash‑sale rules were written for securities and that the IRS has not conclusively applied the wash‑sale rule to decentralized cryptocurrencies in the same way it applies to equities, ETFs, and mutual funds. TurboTax and other mainstream tax resources have indicated that, historically, wash‑sale rules do not apply to cryptocurrency transactions because most cryptocurrencies lack CUSIPs and do not fall under the securities framework.

Caveats and considerations:

Tax law and IRS guidance can change. Cryptocurrency tax treatment is evolving, and legislative or regulatory updates could change wash‑sale applicability.
Some crypto products that are securities (e.g., tokenized securities or crypto funds treated as securities) could fall squarely under wash‑sale rules.
Always check current IRS guidance or consult a tax professional experienced with crypto tax issues.

Reporting and Compliance

When a wash sale occurs, how do you report it?

Brokers report many wash sales on Form 1099‑B for trades they control within an account, showing disallowed losses and adjusted cost basis for replacement shares when applicable.
Form 8949 and Schedule D are used to report capital gains and losses. Disallowed losses should not be deducted in the year of the sale; instead, the adjusted basis of replacement shares should be used for future reporting.
Because brokers often only report wash sales within a single account, taxpayers must reconcile cross‑account or IRA wash sales that brokers do not report. Failing to report can lead to audits or corrected returns.

Practical reporting steps:

Review 1099‑B carefully for wash‑sale annotations.
Maintain your own spreadsheet of purchases and sales across all accounts.
Use specific‑identification methods where possible to control which lots are sold and to support tax positions.
Consult a CPA or tax advisor for complex cross‑account situations.

International and Jurisdictional Differences

Wash‑sale rules are a feature of U.S. tax law. Other countries differ:

Some jurisdictions have explicit anti‑avoidance or superficial loss rules similar to the U.S. wash‑sale rule.
Other countries may not disallow immediate repurchases or may treat related‑party sales differently.

If you are not a U.S. taxpayer, check local tax rules or consult a local tax professional.

Practical Considerations for Traders and Investors

Beyond tax mechanics, practical matters influence the answer to “can you sell and rebuy stock”: transaction costs, bid‑ask spreads, market timing risk, and behavioral factors.

Trading costs and slippage can make short waiting periods expensive; evaluate net tax savings versus trading costs.
Replacing a position with a similar but not substantially identical security may result in tracking error — the replacement may underperform or outperform the original.
Short‑term vs long‑term holding periods matter for tax rates. Preserving or disrupting a long‑term holding period can be more important than the immediate deduction for some investors.
Don’t let the desire to harvest tax losses drive poor investment decisions. Maintain an investment plan and use tax strategies to complement, not dictate, that plan.

Frequently Asked Questions (FAQ)

Q: Can you sell and rebuy stock on the same day if you want to claim a loss? A: You can execute same‑day repurchases, but if the sale is at a loss and you repurchase substantially identical securities within 30 days before or after, the loss will be disallowed under the wash‑sale rule.

Q: Does the rule apply to ETFs and mutual funds? A: Yes. If the funds are substantially identical (for example, same fund share class), repurchases can trigger a wash sale. Two funds with materially different holdings or tracking different indexes are less likely to be treated as substantially identical.

Q: Do brokers enforce cross‑account wash sales? A: Brokers typically report wash sales only within a single account. They may not detect purchases in other brokerages or IRAs, so the taxpayer bears responsibility to identify cross‑account wash sales and report them correctly.

Q: What if I gift shares to someone else? A: Related‑party transactions can be complex. Gifting shares and repurchasing similar holdings may have tax implications, and loss denial can apply in some circumstances. Consult a tax advisor for related‑party transactions.

Q: What happens if my dividend reinvestment plan buys shares within the wash window? A: Reinvested dividends can create wash sales. If a reinvestment buys substantially identical shares within 30 days, the portion of loss affected by the reinvested shares may be disallowed and must be accounted for in basis adjustments.

Notes and Legal Disclaimers

This article is informational and does not constitute tax, legal, or investment advice. Tax law and regulatory guidance can change. For personalized advice about “can you sell and rebuy stock” in your specific circumstances, consult a qualified tax professional or CPA who can analyze your positions, account types, and broader tax situation.

Practical Next Steps and Bitget Note

If you are actively trading across taxable accounts and crypto products, track all purchases and sales across custodians. Consider using tax‑lot accounting tools and consult tax professionals when planning harvests around year‑end.

If you manage cryptocurrency alongside equities, remember crypto tax treatment is evolving. For crypto trading and custody, consider secure, regulated tools. Explore Bitget for spot trading, derivatives, and Bitget Wallet for custody needs as part of a broader portfolio approach. Bitget can help you manage crypto exposure while you plan equity tax strategies in taxable accounts.

Further explore Bitget resources to learn secure wallet options, trading tools, and educational content that complements tax‑aware investment planning.

Reporting Date and Context

As of 2026-01-21, according to guidance summarized by tax‑prep and brokerage educational materials (TurboTax, Fidelity, Charles Schwab, Kiplinger, and Motley Fool), the wash‑sale rule continues to govern loss disallowance for substantially identical securities within 30 days before or after a loss sale. These sources emphasize cross‑account tracking and particular pitfalls when IRAs are involved.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.