Tax-loss harvesting only works when the realized loss is deductible. The wash-sale rule is one of the most important limitations because it can disallow a loss when substantially identical stock or securities are acquired too close to the sale.
Why people call it a 61-day window
IRS Publication 550 describes a wash sale when substantially identical stock or securities are acquired within 30 days before or after the loss sale. Counting the sale date produces a 61-calendar-day review window. Looking only at purchases after the sale misses half the rule.
Transactions that can matter
- Buying the same or substantially identical stock or securities
- Acquiring a contract or option to buy substantially identical property
- Purchases in an IRA or Roth IRA
- Purchases by a spouse or a corporation the taxpayer controls
- Automatic dividend reinvestment and recurring purchases
- Activity across more than one brokerage account
“Substantially identical” is not a ticker-pair checklist
The IRS treats this as a facts-and-circumstances question. Publishing a universal list of replacement ETFs as automatically compliant would overstate certainty. Portfolio exposure, fund construction, issuer, index, rights, and the surrounding facts may matter.
What happens to a disallowed loss?
Publication 550 generally adds a disallowed loss to the basis of replacement stock or securities, postponing recognition until a later disposition. But replacement shares acquired in an IRA or Roth IRA are an important exception; the simplified “it is always deferred” explanation is incomplete.
Your brokerage report may not capture everything
Publication 550 says a loss can be nondeductible even when it is not reported as a wash sale on Form 1099-B. A broker may not see spouse activity, another institution, an IRA, or a controlled corporation.
Practical review checklist
- List the exact tax lots proposed for sale.
- Review purchases for 30 days before the sale.
- Pause or account for automatic reinvestment.
- Review spouse, IRA, Roth IRA, option, and other-account activity.
- Document the replacement-investment analysis.
- Coordinate basis and Form 8949/Schedule D reporting.