Wash Sales

What is a wash sale?

A wash sale occurs when you sell a security at a loss and buy the same or substantially identical security within 30 days before or after the sale. The IRS wash sale rule (IRC Section 1091) disallows the loss for tax purposes.

The window is 61 days total: 30 days before the sale, the day of the sale, and 30 days after. If a purchase falls anywhere in that window, the loss is disallowed.

The disallowed loss is not permanently lost. It is added to the cost basis of the replacement security, deferring the loss until that position is sold outside of a wash sale window.

What counts as substantially identical?

The IRS has not provided a precise definition. Generally, the same stock in the same company is substantially identical. Options and other instruments on the same underlying security can also trigger wash sales in certain circumstances. Determining whether two securities are substantially identical is a tax question, so consult a qualified tax professional.

Wash sales and options

Wash sale rules can apply to options. Selling a stock at a loss and buying a call option on the same stock within the wash sale window may trigger the rule. The rules around options and wash sales are complex and fact-specific.

Clear Street's role

Clear Street reports cost basis and proceeds on your 1099-B. Wash sale adjustments for trades within your Clear Street account are generally reflected in the cost basis reported on your 1099-B.

Clear Street can't see activity in other accounts, so wash sales across multiple accounts or brokers aren't reflected. Tracking those is your responsibility. Clear Street also doesn't provide personalized wash sale determinations.

For questions about whether a specific trade triggers a wash sale, consult a qualified tax professional. Clear Street Support cannot provide tax advice.

See also: 📄 Statements, confirms, and tax documents