Crypto Wash Sale Rule: 2026 IRS Rules

You sell a bag of BTC in late December. You buy it back on January 5. Does the wash sale rule wipe the loss? For most spot crypto, no. Section 1091 covers stock or securities. The IRS still treats convertible virtual currency as property. A spot Bitcoin ETF is a different asset.

The wash sale rule (IRC §1091) applies to stock or securities, not property in general. A wash sale happens when you sell stock or securities at a loss and buy substantially identical stock or securities within a 61-day window (30 days before through 30 days after the sale).

Because the IRS treats convertible virtual currency as property, most spot crypto sales are generally not subject to §1091 under current federal rules, even if you sell at a loss and buy the same coin back soon after.

Pro tip
One important exception is crypto exposure held through securities, such as shares of crypto companies or futures-based ETFs, where the wash sale rule applies. How it applies to spot bitcoin and ether ETFs is unsettled.

Under 26 U.S. Code § 1091, if a security you hold has lost value, you generally cannot sell it to claim the loss and buy the same or a substantially identical security within the 61-day window that starts 30 days before the sale and ends 30 days after it. The disallowed loss is not gone. It moves into the basis of the replacement shares, and you report the adjustment with code W in column (f) of Form 8949. The holding period of the sold shares also carries over to the replacement shares (IRC §1223).

There are exceptions to that deferral. If you sell stock at a loss and buy substantially identical stock in an IRA or Roth IRA within the window, the loss is disallowed and doesn't increase the IRA's basis. This applies to securities covered by the wash sale rule, not to ordinary spot crypto.

This rule prevents taxpayers from using "artificial" losses to offset their gains and lower their capital gains tax liability.

The main idea of the rule is that a loss is disallowed when a taxpayer sells stock or securities at a loss and acquires substantially identical stock or securities within the 61-day window.

Crypto wash sale example

On December 30, Aaron has a net gain of $10,000 for the year after accounting for $15,000 in gains and $5,000 in losses from other investments.

In addition, he owns 20 BNB that originally cost him $10,000, though their current market value has fallen to $4,000. Aaron decides to sell these 20 BNB for $4,000, which results in a realized capital loss of $6,000 (the difference between his $10,000 cost basis and the $4,000 sale price).

Then, on January 5, six days after the sale, Aaron repurchases the same 20 BNB for a total of $4,200. Under current law, ordinary spot crypto generally falls outside Section 1091. Assuming Aaron held BNB as an investment and no other rule disallows the loss, he can generally claim the $6,000 capital loss even though he bought BNB back six days later. If the rule did cover BNB, the repurchase would fall inside the 61-day window, and the $6,000 loss would be disallowed.

In that case, the cost basis of his newly acquired BNB would be adjusted to include the disallowed loss of $ 6,000 (the repurchase price), for a total of $10,200. If Aaron later sold these BNB, this adjusted cost basis would be used to determine his taxable gain or loss on that sale.

Section 1091 still applies to stock or securities, not to property in general. Notice 2014-21 treats convertible virtual currency as property. That's why most spot Bitcoin, ETH, and SOL sales sit outside the 61-day window.

Two House bills would extend the wash sale rule to digital assets. H.R. 9172, the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act (introduced on June 8, 2026), was referred to the Ways and Means Committee. H.R. 10357, the Digital Asset Tax Certainty Act (introduced September 14, 2026), was ordered reported by Ways and Means 38–5 on September 16, 2026; as introduced, its wash sale section covers only fungible "traded digital assets." Neither is law as of October 2026.

Both bills include effective dates that could reach sales made before enactment. Ways and Means amended H.R. 10357 to set September 14, 2026, as its effective date. Neither bill is law, and the final dates could change.

H.R. 9172 would cover any digital asset other than a qualified U.S. dollar stablecoin, including NFTs. Both bills would treat an economically equivalent wrapped or tokenized version as substantially identical and would extend constructive-sale rules to digital assets.

If Congress later extends section 1091 to digital assets, a year-end sale and an early-January rebuy could fall in the same 61-day window. Until that is law, the live rule is still stock or securities.

If you hold ETF shares or tokenized stock, the 61-day window may now apply to them.

The federal wash-sale rule under Section 1091 generally does not apply to most spot cryptocurrency transactions because it applies only to stock and securities.

As a result, selling crypto at a loss and quickly repurchasing the same asset does not currently trigger an automatic wash-sale disallowance, although the law could change. Transactions that lack economic substance can still be challenged under §7701(o), but the IRS hasn't issued guidance saying that selling spot crypto at a loss and rebuying it violates the doctrine. Any penalty would depend on the facts.

A same-day rebuy of spot crypto doesn't, under current law (as of October 2026), automatically disallow the capital loss. Losses on sales to related parties, such as family members or entities you control, are disallowed under §267. Realized losses offset capital gains first, then up to $3,000 of ordinary income ($1,500 if married filing separately), with the rest carried forward. See how to report crypto losses.

Crypto company stocks, futures ETFs, and tokenized stocks follow securities rules; spot crypto ETFs are unsettled. Keep dates, proceeds, and basis so Form 8949 is clean if the statute later changes. Network fees are generally transaction costs: on a cash purchase they add to your basis, and on a sale they reduce your proceeds. In a crypto-to-crypto swap, the IRS's final regulations generally assign the fees to the crypto you give up. You must report sales on Form 8949 even if you do not receive a Form 1099-DA.

Box 1i of Form 1099-DA reports disallowed wash sale losses on certain tokenized securities, when the sale and repurchase happen in the same account and involve securities with the same CUSIP. Ordinary spot bitcoin and ether trades aren't subject to that reporting.

What to record when you sell crypto at a loss

If Congress copies the securities rule, expect a window that looks at purchases on both sides of the sale, not a 30-day wait afterward. Keep the sale date, rebuy date, proceeds, and basis on every lot. If the law changes and applies retroactively, those records are what let you show what happened and when.

Pro tip
For more on this topic, see our comprehensive, expert article on crypto tax loss harvesting, plus our guides to NFT tax loss harvesting and crypto cost basis.

Wash trading in the crypto market involves artificially inflating trading volume by executing buy and sell orders for the same asset, creating misleading market activity.

Crypto wash sales are different from wash trading. Wash trading involves transactions intended to create misleading market activity and may violate exchange rules or market-manipulation laws.

In the US, wash trading may violate exchange rules and market-manipulation laws. In October 2024, the Justice Department charged 18 individuals and firms with crypto wash trading in Operation Token Mirrors. Wash trading can raise concerns about market manipulation or fraud, depending on the facts and the location of the trading, so it is not something to treat as "safe" behavior.

With attention to US tax rules, including the wash sale rule, TokenTax crypto tax software calculates capital gains totals using various crypto accounting methods, including FIFO and specific identification methods such as HIFO and our proprietary Minimization.

With Minimization, we've built on the HIFO accounting method with a proprietary approach that automatically adjusts to an individual's tax rate to help reduce your reported gains. TokenTax records the sale and rebuy dates on each lot, so your Form 8949 stays accurate if the wash sale rule changes. And if you ever need further assistance or clarity about anything related to crypto and taxes, including the crypto wash sale rule, our crypto tax professionals are available to assist.

Pro tip
Your choice of accounting method can affect how you handle wash sales. For more on this, see our expert article to help you identify the correct crypto accounting method.