A stock sold at a loss on December 31, 2026 can still lower 2026 taxes though it settles in January, because the IRS dates a sale by its trade day. December 31 is the last day for tax-loss harvesting, and the wash sale rule holds the loss back if the same stock is bought from December 1 to January 30.
The short answer. A stock sold at a loss on Thursday, December 31, 2026 is a 2026 loss even though it settles in January. The loss cancels capital gains first, then up to $3,000 of other income for most filers, and the rest carries forward.
Buying the same or a substantially identical stock within 30 days before or after the sale blocks the loss. A spouse's buy counts too, and an IRA buy blocks the loss without adding it to the IRA's cost.
For a December 31 sale, Monday, February 1, 2027 is the first trading day outside the window. Today the rule names only stock and securities, and a House bill would add traded crypto, except dollar stablecoins from approved issuers, for sales after September 14, 2026.
| Date | Event |
|---|---|
| 2026-11-30 | Last day before the window opens |
| 2026-12-01 | Window opens, 30 days before the sale |
| 2026-12-31 | Loss sale traded, counts for 2026 |
| 2027-01-04 | Trade settles, one business day later |
| 2027-01-30 | Window closes, 30 days after the sale |
| 2027-02-01 | First trading day outside the window |
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Tax-loss harvesting means selling an investment that is worth less than you paid, so the loss shows up on this year's tax return. The loss cancels capital gains first, with no cap.
A loss only counts once it is realized, which means the shares are actually sold. A stock that is down on paper changes nothing on the return. Once sold, the loss lands in one of two buckets, set by how long the shares were held. Short-term means one year or less, and long-term means more than a year, counted from the day after the purchase (IRS Topic 409).
Gains and losses are netted inside each bucket first. Then the two results are combined into one total on Schedule D, the capital gains form (IRS Publication 550). So a long-term loss can end up offsetting a short-term gain. That matters because net short-term gains are taxed as ordinary income, at the same rates as a paycheck, according to Topic 409.
The last day is Thursday, December 31, 2026, a normal trading day. A sale made that day counts for 2026 even though the cash and shares only change hands in January.
Publication 550 answers this one directly. For stocks traded on an exchange, the holding period "ends on the trade date you sold them." The IRS then warns readers not to confuse the trade date with the settlement date, the day the shares are delivered and the money is paid.
The publication's own example is a December 31 sale. The taxpayer uses the cash method, reporting income in the year it is received, and a calendar tax year. The stock is sold on December 31, 2025 and the trade settles in January 2026. The IRS says to report the gain or loss on the 2025 return, even though the payment came in 2026. The same rule puts a December 31, 2026 trade on the 2026 return.
A common rule of thumb says a trade must also settle by December 31, which would make Wednesday, December 30 the last day. The IRS rule looks only at the trade date, so how long settlement takes does not matter.
Settlement in the US has taken one business day since May 28, 2024, a cycle called T+1 settlement. A trade on Thursday, December 31 would normally settle Friday, but the market is closed on New Year's Day, Friday, January 1, 2027 (NYSE holiday calendar). So it settles on Monday, January 4, 2027, and it is still a 2026 sale. The full list of market closures is in StockTitan's market holiday schedule.
In this made-up example with round numbers, selling a losing stock cuts the tax on a $10,000 short-term gain by $1,440. A bigger loss also trims other income, such as wages.
Take a single filer with about $150,000 of taxable income in 2026. At that level, ordinary income falls in the 24% bracket and long-term gains in the 15% bracket (IRS Rev. Proc. 2025-32). A short-term gain is taxed at the ordinary rate, according to Topic 409.
Earlier in 2026, the filer sold one stock for a $10,000 gain. Another stock is down $6,000, and the filer sells it before the year ends. The loss cancels $6,000 of the gain, so $4,000 of net gain is left.
That cuts the tax on the gain by $1,440 if it is short-term, taxed at 24%. If the gain is long-term, taxed at 15%, the cut is $900.
Now say the losing stock is down $14,000 instead. The loss wipes out the whole gain.
Then $3,000 comes off other income, and the last $1,000 carries over to 2027. At 24%, that $3,000 trims another $720 from the 2026 tax.
| Made-up 2026 case, single filer | No loss sold | $6,000 loss sold | $14,000 loss sold |
|---|---|---|---|
| Net capital gain | $10,000 | $4,000 | $0 |
| Tax on the gain if short-term, at 24% | $2,400 | $960 | $0 |
| Tax on the gain if long-term, at 15% | $1,500 | $600 | $0 |
| Loss taken against other income | $0 | $0 | $3,000 |
| Tax cut on other income, at 24% | $0 | $0 | $720 |
| Loss carried to 2027 | $0 | $0 | $1,000 |
Source: IRS Publication 550 (2025) and Topic 409 for the netting, the $3,000 limit and the carryover; IRS Rev. Proc. 2025-32 for the 2026 brackets.
The cut is for 2026 only. A later gain on whatever replaces the sold stock can take back part of it, as the section below on when harvesting saves less explains.
Up to $3,000 of net capital loss a year against other income, or $1,500 when married and filing separately. The rest carries forward with no time limit.
The cap applies only after gains are netted. A loss can cancel any amount of capital gains in the same year, and only the loss left over is limited, according to Publication 550. That leftover reduces other income, such as wages, dollar for dollar up to the cap. The unused part carries to the next year as if it happened then, and it keeps carrying "until it is completely used up."
A carried loss stays short-term or long-term. When a leftover loss is part short-term and part long-term, the $3,000 deduction uses the short-term part first, so more of the long-term part carries over. Publication 550's Capital Loss Carryover Worksheet does this arithmetic for a given return.
The wash sale rule blocks a loss when the same or a substantially identical stock is bought within 30 days before or after the sale. For a December 31 sale, that means any purchase from December 1, 2026 to January 30, 2027.
The rule is section 1091 of the tax code (26 U.S.C. 1091). It covers a loss on "stock or securities" when the seller buys substantially identical shares, or a contract or option to buy them. The period starts 30 days before the sale and ends 30 days after it. Those are calendar days, so weekends and holidays sit inside the window.
For a December 31, 2026 sale, that makes a 61-day window, 41 of them trading days, that opens on Tuesday, December 1, 2026 and closes on Saturday, January 30, 2027. The first trading day outside it is Monday, February 1, 2027.
The window looks backward too, which the common "wait 30 days" shorthand hides. Shares of the same stock bought on December 10 and the older shares sold at a loss on December 31 make a wash sale, even with no purchase in January. For that sale, a buy on November 30 or earlier falls before the window.
The same count works for any sale date. The window opens 30 calendar days before the trade date and closes 30 calendar days after it.
| Loss sale traded on | Window opens | Window closes | First trading day after it closes |
|---|---|---|---|
| Friday, November 20, 2026 | Wednesday, October 21, 2026 | Sunday, December 20, 2026 | Monday, December 21, 2026 |
| Tuesday, December 1, 2026 | Sunday, November 1, 2026 | Thursday, December 31, 2026 | Monday, January 4, 2027 |
| Tuesday, December 15, 2026 | Sunday, November 15, 2026 | Thursday, January 14, 2027 | Friday, January 15, 2027 |
| Thursday, December 31, 2026 | Tuesday, December 1, 2026 | Saturday, January 30, 2027 | Monday, February 1, 2027 |
Source: 26 U.S.C. 1091 for the 30 days before and after a sale; NYSE holiday calendar for 2026 and 2027.
A washed loss is postponed, not erased, in an ordinary account. Publication 550 adds the blocked loss to the cost of the new shares, and their holding period includes the time the old shares were held. The loss then counts when the new shares are sold, unless that sale is washed too.
The IRS example: 100 shares bought for $1,000 are sold for $750, and 100 shares of the same stock are bought within 30 days for $800. The $250 loss is not deductible. The new shares' cost becomes $1,050, the $800 paid plus the $250 blocked loss (Publication 550).
When fewer shares are bought back than were sold, only the matching part of the loss is blocked.
Another Publication 550 example: 100 shares are sold at a $1,000 loss, and 75 shares of the same stock were bought in the 30 days before the sale. The loss on those 75 shares, $750, is blocked. The loss on the other 25 shares, $250, stays deductible.
Publication 550 gives a few examples and leaves the rest to the facts. It says one company's stock is ordinarily not substantially identical to another company's, and it gives no rule for funds.
Publication 550 says to "consider all the facts and circumstances in your particular case." Its exceptions are narrow. Stock of an old and a new company can match after a reorganization. A company's convertible preferred stock can match its common stock in a few cases.
Options are covered by name. The rule applies to losses on contracts and options to buy or sell stock. Buying warrants, rights to buy the stock at a set price, on the same company's common stock while selling that stock at a loss also triggers it. The rule does not apply to commodity futures or foreign currencies.
The rule does not require staying out of the market while the window is open. It blocks a loss only when the new holding is the same as the old one or substantially identical to it. Cash is outside the rule. So is a different company's stock, which Publication 550 ordinarily treats as not substantially identical. So is the same stock bought again after the window closes.
Funds are the gray area. A fund on a different index, or a broader fund that holds many more companies, owns something different from a single stock. Publication 550 still gives no rule for funds, so each case stays with the facts-and-circumstances test. That includes the closest case, two funds from different managers that track the same index. StockTitan's index fund guide explains how such funds are built.
Yes. Buying the same stock in your own IRA or Roth IRA within the window blocks the loss in the regular account where the sale happened. A spouse's purchase counts too.
Publication 550 lists four kinds of purchase that wash a loss, and the fourth is buying substantially identical stock "for your individual retirement arrangement (IRA) or Roth IRA". It also says that when you sell and your spouse or a corporation you control buys substantially identical stock, "you also have a wash sale."
The IRA case costs more than the ordinary one. In Revenue Ruling 2008-5, the IRS ruled that the loss is disallowed and that the owner's basis in the IRA, the cost the IRS counts for it, is not increased. Unlike a taxable buy, an IRA buy does not add the blocked loss to the new shares' cost.
| Bought back in a taxable account | Bought back in an IRA or Roth IRA | |
|---|---|---|
| Loss on this year's return | Not allowed | Not allowed |
| Where the loss goes | Added to the new shares' cost, counted when they are sold | Not added to the IRA's basis (Rev. Rul. 2008-5) |
Reinvested dividends buy new shares too. Publication 550 says each reinvested share's holding period "begins the day after that share was purchased," and section 1091 reaches any purchase inside the window. So a reinvestment in the same stock can wash the part of a loss that matches the shares it bought.
A washed loss goes on Form 8949 with the code W and the blocked amount as a positive number in the adjustment column. Box 1g of Form 1099-B shows that amount when the broker tracked it.
Form 1099-B is the year-end statement a broker sends, and the 2026 one is due to investors by Tuesday, February 16, 2027 (IRS Publication 1099). Its box 1g is labeled "Wash sale loss disallowed." Brokers must fill it in when the sale and the buy happened in the same account. That duty applies to covered securities with the same CUSIP number, a security's ID code (Form 1099-B instructions). For stock, a covered security generally means shares bought after 2010, and for those the broker also reports what the shares cost.
Brokers may report wash sales across accounts, but they do not have to. So a buy at another broker, in an IRA or by a spouse can be missing from box 1g. Publication 550 is plain about the rest: "you cannot deduct a loss from a wash sale even if it is not reported on Form 1099-B."
On Form 8949, a short-term sale goes in Part I and a long-term sale in Part II. The code W goes in column (f), and the blocked loss goes in column (g) as a positive number. Column (h) then shows the proceeds minus the cost, plus that adjustment (Form 8949 instructions).
Back to the IRS example of 100 shares bought for $1,000 and sold for $750. The $750 goes in column (d), the $1,000 cost in column (e), W in column (f) and $250 in column (g). Column (h) shows $0, because the $250 loss moved into the new shares' cost.
When box 1g shows the wrong amount, the instructions say to enter the correct one in column (g). A smaller figure than the broker's also needs an attached statement that explains the difference. A sale with any amount in box 1g cannot skip Form 8949 and go straight to Schedule D as a summary total.
Today the rule names only stock or securities, and the IRS has issued no official advice applying it to coins. A House bill would bring crypto under the rule for coins sold after September 14, 2026, a date already past.
Under the law in force, the IRS says that for US tax purposes "digital assets are considered property, not currency" (IRS digital assets page). Congress's own tax staff wrote in September that digital assets "are not expressly within the scope of section 1091," and that the IRS has issued no rules or official advice on the point (Joint Committee on Taxation, JCX-47-26).
Tokens that are themselves securities are another matter. The 2026 instructions for Form 1099-DA, the new crypto broker form, require brokers to report wash sale losses on tokenized securities (IRS Form 1099-DA instructions). One kind is a token that gives its holder an interest in a stock.
The House bill is H.R. 10357, the Digital Asset Tax Certainty Act. Its section 301 would cover traded crypto other than qualified US dollar stablecoins. Those are coins tied to the dollar whose issuer is approved or registered under the GENIUS Act, the federal law on stablecoins. The House Ways and Means Committee approved a revised text on September 16, 2026, and its section 301 "shall apply to dispositions after September 14, 2026" (committee text). If it became law in that form, a coin sold at a loss since then and bought back within 30 days would have its loss blocked.
The bill record was last updated on October 28, 2026. As of November 15, it shows the committee vote as the latest action, so the bill has not passed the House or the Senate (bill record).
The Senate bill, S. 5616, the ADAPT Act, was introduced on September 30, 2026 (bill text). It would also cover traded crypto except qualified US dollar stablecoins, but only for sales after it became law and not for coins bought before then. As of November 15, 2026, its record, last updated October 14, shows no action since the bill went to the Senate Finance Committee (Senate bill record).
| Law in force | H.R. 10357 as approved in committee | |
|---|---|---|
| What the rule covers | Stock or securities, and options on them | Adds traded crypto, except qualified US dollar stablecoins |
| A coin sold and bought back | No IRS guidance applies the rule | Loss blocked like a stock's |
| Sales it reaches | Not applicable | Sales after September 14, 2026 |
| Where it stands | In force | Approved 38 to 5 by House Ways and Means |
Part of the saving is often a delay. A replacement bought at today's lower price has a lower cost, so its later sale shows a bigger gain. A loss also saves nothing on long-term gains that the 0% rate already covers.
The cost of property bought is usually what was paid for it, according to IRS Publication 551. A replacement bought after a loss sale starts at the lower, current price. Go back to the example above and say the $6,000 loser is replaced by a fund bought with the sale's proceeds. If that fund later climbs $6,000 and is sold, that $6,000 is a gain in the year of the sale. So the first tax cut is partly a postponement.
The timing still changes the rate. A loss taken now can cancel a short-term gain taxed at the ordinary rate. A later gain on a replacement held more than a year is long-term, taxed at 0%, 15% or 20%.
Long-term gains owe nothing up to a set income level. For 2026, the 0% rate covers taxable income up to $49,450 for a single filer and $98,900 for a married couple filing jointly (Rev. Proc. 2025-32).
Schedule D nets every loss against the year's gains first. So take a year when taxable income stays under the 0% line and the net gain is all long-term. A loss that cancels that gain saves no tax on it, and the loss is used up.
| 2026 taxable income, by filing status | 0% on long-term gains up to | 15% up to, 20% above |
|---|---|---|
| Single | $49,450 | $545,500 |
| Married filing jointly | $98,900 | $613,700 |
| Married filing separately | $49,450 | $306,850 |
| Head of household | $66,200 | $579,600 |
Source: IRS Rev. Proc. 2025-32, section 4.03, maximum capital gains rate amounts for taxable years beginning in 2026; rates of 0%, 15% and 20% from IRS Topic 409.
Shares held until death are a different case. Heirs generally take a cost equal to the stock's fair market value on the date of death, according to Publication 551. So a gain built up in the owner's life drops out of the heirs' later gain, and a loss the owner never sold drops out too. Publication 550 adds that a sale of inherited stock is long-term however briefly the heir held it.
State income taxes on capital gains differ from state to state and are not part of these federal figures.
A stock sold at a loss by December 31 counts for 2026, and a matching buy in the 61 days around it holds that loss back. What a loss is worth on a given return depends on the household's income, filing status and every account it holds, and Publication 550 sets out the full rules.
What to watch
Our numbers
These figures are our calculations from the sources linked in this article. The example's rates illustrate the arithmetic, and a real return's rates depend on its whole income.
Calendar days. Section 1091 counts 30 days before and 30 days after the date of the sale, with no mention of trading days, so weekends and market holidays count. A window that ends on a Saturday still ends on that Saturday.
Yes. Buying a contract or option to acquire the same stock within the window washes a stock loss, and the rule also covers losses on options themselves, according to Publication 550. It does not reach commodity futures or foreign currencies.
It can. Publication 550 treats each share bought with reinvested dividends as purchased on its own date. A reinvestment into the same stock within 30 days of a loss sale can wash the part of the loss that matches those shares.
In narrow cases. Publication 550 says a preferred stock can match the same company's common stock when it converts into that common stock. Among other conditions, it must also vote the same way and trade close to the value of the common shares it converts into.
It depends on the kind of payout. Capital gain distributions are payouts from mutual funds and real estate investment trusts, shown in box 2a of Form 1099-DIV. They count as long-term capital gains, so capital losses offset them with no cap. Ordinary dividends, the most common payout, come out of a company's or a fund's earnings and are not capital gains. Qualified dividends are ordinary dividends taxed at the lower capital gains rates, yet they are still not capital gains. For both, only the net loss left after gains, up to $3,000 a year, lowers that income (Publication 550).
Deducting a real loss from a sale is part of the tax code, and Publication 550 sets out how. The wash sale rule is the limit on it. A loss is not allowed when the same or a substantially identical stock is bought within 30 days before or after the sale.
Sources
