How does the wash sale rule work with stocks and options in 2025?

The wash sale rule (IRC Section 1091) prevents you from claiming a tax loss on a security if you purchase a substantially identical security within 30 days before or after the sale. The 61-day window (30 days before + sale day + 30 days after) is critical to understand.

How it works: If you sell 100 shares of Apple at a $5,000 loss and buy Apple shares again within 30 days, the $5,000 loss is disallowed. Instead, the loss is added to your cost basis of the new shares. The loss is not gone forever; it is deferred until you sell the replacement shares.

Options and wash sales: The IRS considers options on the same underlying stock to be substantially identical in certain cases. Selling stock at a loss and then buying a call option on the same stock within 30 days can trigger a wash sale. Selling a put option (which could result in acquiring the stock) may also trigger the rule. The IRS has not published definitive guidance on all option scenarios, so err on the side of caution.

What is NOT substantially identical:

• Selling an individual stock and buying an ETF that contains it (generally safe, but an ETF that closely tracks the single stock could be challenged)
• Selling a bond and buying a different bond from the same issuer with different terms
• Selling shares in one S&P 500 ETF and buying a different S&P 500 ETF (debatable; the IRS has not ruled definitively)

Across accounts: Wash sales apply across ALL your accounts, including your spouse's accounts, IRAs, and brokerage accounts. Brokers only track wash sales within a single account, so you are responsible for tracking cross-account wash sales yourself. A wash sale into an IRA is especially dangerous because the disallowed loss is permanently lost (you cannot adjust the IRA basis).