Quick answer
A US tax rule that disallows a claimed loss if you buy back the same or substantially identical asset within 30 days.
Tax Filing
United States
Wash Sale Rule
IRS rule disallowing a tax loss if you repurchase the same asset within 30 days; crypto applicability is debated.
United StatesUnderstanding Wash Sale Rule on crypto
The wash sale rule under IRC Section 1091 prevents investors from claiming a tax loss if they sell a security at a loss and repurchase the same or substantially identical security within 30 days before or after the sale. If triggered, the disallowed loss is added to the cost basis of the repurchased asset rather than eliminated permanently. Critically, the IRS currently classifies cryptocurrency as property rather than a security — which means the wash sale rule does not technically apply to crypto under existing law. However, multiple legislative proposals have sought to extend the rule to digital assets, and this remains an active area of regulatory debate.
The wash sale rule under IRC Section 1091 prevents investors from claiming a tax loss if they sell a security at a loss and repurchase the same or substantially identical security within 30 days before or after the sale. If triggered, the disallowed loss is added to the cost basis of the repurchased asset rather than eliminated permanently. Critically, the IRS currently classifies cryptocurrency as property rather than a security — which means the wash sale rule does not technically apply to crypto under existing law. However, multiple legislative proposals have sought to extend the rule to digital assets, and this remains an active area of regulatory debate.
What this means for your crypto activity
Immediate repurchase allowed
Currently, US crypto investors can sell at a loss and immediately repurchase the same token without losing the tax benefit.
Advantage over securities
This creates a loss harvesting advantage unavailable for stocks and securities.
Legislative proposals ongoing
Multiple legislative proposals since 2021 have sought to extend wash sale rules to digital assets; none have passed as of 2026, but investors should monitor ongoing tax reform discussions.
Watch for retroactive changes
Investors should monitor legislative changes — the rule could be extended to crypto retroactively.
30-day window risk
If extended, repurchase within 30 days before or after a loss sale would disallow the loss deduction.
- Currently, US crypto investors can sell at a loss and immediately repurchase the same token without losing the tax benefit.
- This creates a loss harvesting advantage unavailable for stocks and securities.
- Multiple legislative proposals since 2021 have sought to extend wash sale rules to digital assets; none have passed as of 2026, but investors should monitor ongoing tax reform discussions.
- Investors should monitor legislative changes — the rule could be extended to crypto retroactively.
- If extended, repurchase within 30 days before or after a loss sale would disallow the loss deduction.
Seeing it in action
Example scenario
David sells 5 ETH at a $3,000 loss in December. The same day, he repurchases 5 ETH at the same price. Under current IRS rules, the $3,000 loss is still claimable because crypto is not a security. If the wash sale rule were extended to crypto, this loss would be disallowed and added to the cost basis of the repurchased ETH.
How this works across jurisdictions
- United States
Wash sale rule does not currently apply to crypto under IRS property classification; however legislative proposals to extend it are ongoing and investors should stay updated. While Section 1091 remains unextended to spot crypto, centralized brokers must now issue Form 1099-DA directly to the IRS to report digital asset gross proceeds. Additionally, the IRS actively scrutinizes rapid, immediate automated loss harvesting transactions via broad "Economic Substance" and "Sham Transaction" audit filters to ensure transactions carry true economic value beyond simple paper adjustments.
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