Wash-Sale Rule

The wash-sale rule prevents you from claiming a tax loss while effectively staying in the same position. If you sell an investment at a loss and buy the same — or a substantially identical — security within 30 days before or after the sale, the IRS disallows the loss for that year. The disallowed loss isn't gone forever; it's added to the cost basis of the replacement shares, deferring the benefit rather than erasing it.

It matters most for tax-loss harvesting. To book a loss without running afoul of the rule, investors typically buy a similar-but-not-identical fund — say, a different provider's total-market index — which keeps their market exposure intact while still realizing the loss. The 30-day window runs in both directions, so it's easy to trip accidentally through automatic dividend reinvestment or buying in another account, including an IRA.