Wash-Sale Rule: What It Is and How to Avoid

By Jason Hall – Updated Jul 17, 2025 at 4:45 PM

Key Points

Selling a stock at a loss can offset other capital gains, but there are rules to follow.
Wash-sale rules disallow tax loss claims if identical stocks are bought 30 days before or after the sale.
To avoid a wash sale, don't repurchase the same stock within the 30-day window around selling it.

It's not uncommon for investors who own stocks or securities that have lost value to sell them in order to take advantage of the losses for tax reasons. It's not a bad idea, especially if it's a stock you want to sell anyway; you can use the loss to offset capital gains or even, to some extent, offset your taxable income from other sources, such as regular earnings.

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An infographic defining and explaining what the wash-sale rule is in stocks. — Image source: The Motley Fool

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A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:Buy substantially identical stock or securities,Acquire substantially identical stock or securities in a fully taxable trade,Acquire a contract or option to buy substantially identical stock or securities, orAcquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.

Let's summarize: A wash sale isn't solely about purchasing stocks; it can also involve acquiring options to buy stock. Moreover, the rule also counts if you buy identical shares in a different account, including a traditional or Roth IRA. In other words, you can't harvest a tax loss in your taxable account if you purchase shares within the window that creates a wash sale, even in a different account (including retirement accounts).

One final note: Wash-sale provisions work on shares that you sell for a loss, but there are no corresponding wash-sale rules for stock that you sell at a gain. That is, if you sell stock for a gain and buy it right back, you must still report the entire gain.

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About the Author

Jason Hall is a contributing Motley Fool stock market analyst with more than a decade of experience writing about dividend stocks and long-term investing. He has been with the company since 2012 and previously spent over 10 years in technical sales in the printing and information services industry. Jason also founded and operated a small food manufacturing business.

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