The Crypto Wash Sale Rule: It Doesn't Apply — Yet
The one-sentence answer: the US wash sale rule does not currently apply to cryptocurrency, because the IRS treats crypto as property, not securities. That means you can sell a coin at a loss and buy it back the same day, and the loss is still deductible. This is the single biggest reason crypto tax-loss harvesting works better than stock tax-loss harvesting — but only in the US, and only for now.
Let me explain the rule, why crypto is exempt, and how other countries handle the same situation differently.
What the wash sale rule actually does
Under IRC Section 1091, if you sell stock or securities at a loss and buy "substantially identical" stock or securities within 30 days before or after the sale, the loss is disallowed. The disallowed loss gets added to the cost basis of the new position instead.
The purpose is to stop people from generating artificial tax losses by selling a stock, immediately buying it back, and claiming the loss without actually changing their economic position.
Why it doesn't apply to crypto
The wash sale rule applies specifically to "stock or securities." The IRS's classification of cryptocurrency, established in Notice 2014-21, is property — not a security. Because crypto is property, the wash sale statute doesn't reach it.
This is not a gray area the IRS has failed to notice. They have noticed, and they've repeatedly asked Congress to extend the wash sale rule to crypto. Several budget proposals would do exactly that. But as of 2026, no such law has passed, so the exemption stands.
What this means in practice
Say you bought 1 BTC for $40,000 and it's now worth $30,000. You sell it, realize a $10,000 loss, and buy 1 BTC back five minutes later for $30,000.
- Stocks: the $10,000 loss is disallowed; the new position has a $40,000 cost basis.
- Crypto (US): the $10,000 loss is allowed; the new position has a $30,000 cost basis. You just generated a real, deductible tax loss while staying fully invested.
This is exactly the strategy the tax-loss harvesting calculator is built around — and it works only because of this wash-sale exemption.
The risks of relying on it
Two things to be careful about:
- It could change. If Congress extends the wash sale rule to crypto, losses on same-day sell-and-rebuy could be disallowed. There's no guarantee it would be applied retroactively, but it's a risk worth knowing.
- The IRS has other tools. Even without the wash sale rule, the IRS could challenge blatant artificial-loss schemes under the general economic-substance doctrine or step-transaction doctrine. A genuine sell-and-rebuy at market is fine; a 1-second round-trip designed purely to manufacture a loss is shakier.
Other countries — the rules differ a lot
🇬🇧 UK: the bed-and-breakfast rule (applies to crypto)
The UK's 30-day rule (the "bed and breakfast" rule) is a general capital-gains rule, not securities-specific — so it applies to crypto. If you sell an asset and repurchase the same asset within 30 days, the repurchase is matched against the sale, effectively cancelling the gain or loss. So unlike the US, you cannot harvest a crypto loss in the UK by selling and rebuying within 30 days. The Section 104 pool still applies to the remainder.
🇨🇦 Canada: the superficial loss rule (applies to crypto)
Canada's superficial loss rule works similarly: if you (or an affiliated person) acquire the same or identical property within 30 days before or after a loss sale, the loss is denied and added to the cost of the replacement. This applies to all capital property, including crypto.
🇩🇪 Germany: no wash-sale rule
Germany has no specific wash sale or superficial loss rule for crypto. However, the speculative period (1 year for most crypto) means losses within that period are counted against gains — selling at a loss and rebuying doesn't change the net position over the year, so the tax benefit only matters if you had other gains to offset.
🇦🇺 Australia: no specific rule, but anti-avoidance
Australia has no wash-sale rule for crypto. However, the ATO can apply Part IVA (the general anti-avoidance rule) to transactions whose sole purpose is generating a tax loss. A genuine market sale-and-rebuy is unlikely to be challenged; a contrived round-trip might be.
Country summary
| Country | Wash-sale-type rule for crypto? | Can sell-loss + rebuy immediately? |
|---|---|---|
| US | No | ✅ Yes — loss allowed |
| UK | Yes (30-day B&B) | ❌ Loss cancelled |
| Germany | No | ✅ Yes |
| Canada | Yes (superficial loss) | ❌ Loss denied |
| Australia | No specific rule (Part IVA applies) | ✅ Generally yes |
Bottom line
For US taxpayers, the wash-sale exemption is a genuine, legal advantage of crypto tax-loss harvesting — and it's one of the few areas where crypto tax is genuinely more favorable than stock tax. Use it with the loss-harvesting calculator to see how much you could save. Just don't assume it will last forever, and if you're in the UK or Canada, forget the immediate rebuy strategy — the local rules will cancel your loss.
General information, not tax advice. The wash-sale exemption for US crypto is based on current law and could change. For loss-harvesting strategies involving significant amounts, consult a tax professional.
FAQ
Does the wash sale rule apply to cryptocurrency in the US?
No, not currently. The wash sale rule under IRC Section 1091 applies to 'stock or securities,' and the IRS classifies cryptocurrency as property, not securities (per Notice 2014-21). This means you can sell crypto at a loss and immediately repurchase the same crypto without the loss being disallowed. This is one of the main advantages of crypto tax-loss harvesting over stock harvesting. However, Congress and the IRS have proposed closing this gap, so the rule could change.
Can I sell crypto at a loss and buy it back right away?
In the US, yes — the loss is allowed because the wash sale rule does not apply to crypto. In the UK, no — the 30-day bed-and-breakfast rule means a same-asset repurchase within 30 days re-matches the cost basis and effectively cancels the loss. In Canada, no — the superficial loss rule (30 days) denies the loss. In Germany and Australia, there is no specific wash-sale rule for crypto, though general anti-avoidance rules can apply to artificial arrangements.
Will the US wash sale rule be extended to crypto?
It has been proposed repeatedly (e.g., in various budget proposals) but as of 2026 has not been enacted. The IRS could also issue guidance treating crypto as subject to wash-sale-like rules. Until then, the current rule remains: no wash sale for crypto. Anyone harvesting crypto losses should be aware this could change retroactively or prospectively.