The Wash Sale Rule

The IRS's one big rule for tax-loss harvesting

Window

61 days

30 before + sale day + 30 after

Applies to

All accounts

taxable, IRA, even spouse's

Penalty

Loss disallowed

added to new cost basis

You can't sell a stock at a loss and buy the same or 'substantially identical' security within 30 days before or after. If you do, the IRS disallows the loss. This applies across ALL your accounts, including your IRA and your spouse's accounts.

OK (not a wash sale)

Sell VOO, buy IVV (different fund, same index)

Sell AAPL, buy MSFT (different company)

Sell VOO, wait 31 days, buy VOO back

Sell VTI, buy ITOT

Wash sale (loss disallowed)

Sell VOO, buy VOO within 30 days

Sell VOO in taxable, buy VOO in IRA

Sell AAPL, buy AAPL call options

Sell a fund and buy substantially identical one

the workaround

VOO, IVV, and SPLG all track the S&P 500 but are legally different securities. Swapping between them is the standard tax-loss harvesting move and is not a wash sale.

Check yourself

You sell VOO at a loss on March 1. Which action would trigger the wash sale rule?