- Today: the wash sale rule (Internal Revenue Code Section 1091) covers stocks and securities. The IRS treats crypto as property, so the rule doesn't currently apply to crypto.
- Pending: H.R. 10357, the Digital Asset Tax Certainty Act, would extend wash sale rules to digital assets. The Ways and Means Committee approved it 38–5 on September 16, 2026. It is not law.
- Watch the date: summaries of the committee text say the rule would apply to sales after September 14, 2026, if the bill becomes law in that form.
- Harvested losses offset gains, then up to $3,000 of other income a year. The rest carries forward.
What Is the Wash Sale Rule?
The wash sale rule stops investors from claiming a tax loss on a sale when they buy the same or a "substantially identical" investment within 30 days before or after the sale. That's a 61-day window. If a wash sale happens, the loss isn't lost forever: it's added to the cost basis of the replacement shares, so it's deferred until you sell those.
The rule is written for "stock or securities." For stocks, ETFs, and mutual funds, brokers track it automatically and report disallowed losses on Form 1099-B.
Does the Wash Sale Rule Apply to Crypto in 2026?
Not under current law. The IRS treats cryptocurrency as property, not as stock or securities, so Section 1091 doesn't reach it. That means you can sell Bitcoin at a loss on Monday, buy it back on Tuesday, and still claim the loss on your return.
Two caveats:
- Crypto ETFs are securities. Shares of a spot Bitcoin or Ether ETF are covered by the wash sale rule like any other fund.
- Economic substance still matters. The IRS can challenge trades that have no purpose other than creating a tax loss. Selling and immediately rebuying is widely used, but keep it simple, keep records, and don't trade back and forth with yourself or a related account.
H.R. 10357: The Bill That Would Change It
On September 16, 2026, the House Ways and Means Committee approved the Digital Asset Tax Certainty Act (H.R. 10357) by a 38–5 vote. It's a broad crypto tax bill. Among other things, it would:
- Apply wash sale and constructive sale rules to digital assets. A loss would be deferred if you buy a substantially identical asset within the wash sale window.
- Exclude qualified US dollar stablecoins from the wash sale rule, according to summaries of the committee text.
- Create a small de minimis rule: no gain or loss on crypto used to pay network or transaction fees of up to $10, for people with no more than 5,000 digital asset transactions a year.
- Let active traders elect mark-to-market accounting, which would take them out of the wash sale rules.
- Simplify some charitable donations of crypto by removing the appraisal requirement in certain cases.
Summaries of the bill say its wash sale change would apply to crypto sold after September 14, 2026. Tax bills often use a date near their introduction so people can't rush to beat the change. That matters right now: if the bill becomes law as written, a "sell and buy back" trade made this fall could lose its tax benefit.
H.R. 10357 has only cleared committee. It still needs a full House vote, Senate passage, and the President's signature, and this Congress ends in January 2027. Its text, dates, and exclusions could change. Check the bill's status before relying on any harvest you make after September 14, 2026.
How to Harvest Crypto Losses (Step by Step)
- Find coins worth less than you paid. Compare each lot's current value with its cost basis, including fees. Basis is tracked per wallet or account from 2025.
- Sell before December 31. The sale date sets the tax year. A loss sold on January 2 counts for the next year.
- Decide whether to rebuy, and when. Under current law you could rebuy immediately. To stay safe if H.R. 10357 becomes law as written, wait more than 30 days, or buy a different asset you'd be happy to hold.
- Pick the right lots. If you bought at different prices, use specific identification on the exchange (where offered) to sell the lots with the highest basis and the biggest loss.
- Keep records of the date, amount, price, and fees for both the sale and any rebuy.
- Report it on Form 8949 and Schedule D. Your exchange's Form 1099-DA should show the sale.
Tax-Loss Harvesting Example
Say you're single with $90,000 of income. Earlier in 2026, you sold Ether for a $6,000 short-term gain. You also hold Bitcoin bought for $20,000 that's now worth $14,000.
| Don't harvest | Harvest the Bitcoin loss | |
|---|---|---|
| Short-term gain on Ether | $6,000 | $6,000 |
| Loss on Bitcoin sale | $0 | −$6,000 |
| Net taxable gain | $6,000 | $0 |
| Federal tax at 22% | $1,320 | $0 |
The $1,320 isn't saved forever. If you rebuy Bitcoin at $14,000, your new basis is lower, so a future sale shows a bigger gain. But you've deferred the tax, and if you hold the new coins more than a year, that future gain may be taxed at long-term rates instead of 22%. Try your own numbers in our crypto tax calculator.
Crypto Loss Rules to Know
- Order of offset: short-term losses offset short-term gains first, and long-term losses offset long-term gains. Any excess crosses over.
- $3,000 limit: net capital losses can reduce other income by up to $3,000 a year ($1,500 if married filing separately).
- Carryforward: unused losses carry forward to future years with no time limit.
- Worthless or lost coins: coins lost to a hack or scam don't always produce a deductible capital loss. Read the rules for your situation before claiming one.
- State rules differ: New Jersey and Pennsylvania limit how losses can be used. See crypto taxes by state.
Crypto Wash Sale FAQ
Do wash sale rules apply to crypto?
Not under current law. Section 1091 covers stocks and securities, and the IRS treats crypto as property. H.R. 10357 would extend the rule to digital assets, but as of October 2026 it has only passed the House Ways and Means Committee.
Can I sell crypto at a loss and buy it back immediately?
Under current law, yes, and you can still claim the loss. If H.R. 10357 becomes law as written, sales after September 14, 2026 followed by a repurchase within 30 days could have the loss deferred, so waiting more than 30 days is the safer choice.
What is H.R. 10357?
The Digital Asset Tax Certainty Act, a crypto tax bill the House Ways and Means Committee approved 38–5 on September 16, 2026. It would apply wash sale rules to digital assets, add a $10 de minimis rule for fees, and change other crypto tax rules. It isn't law yet.
When is the deadline for crypto tax-loss harvesting?
December 31. The trade must happen by then to count for that tax year. Exchanges can be slow at year-end, so don't leave it to the last day.
Does the wash sale rule apply to Bitcoin ETFs?
Yes. Spot Bitcoin and Ether ETF shares are securities, so the existing wash sale rule already applies to them, just as it does to stock funds.
How much crypto loss can I deduct?
Losses offset all your capital gains with no limit. If losses are larger than gains, up to $3,000 a year ($1,500 if married filing separately) can reduce other income, and the rest carries forward.
Sources
Written by Asad Shaikh
Founder of StartCryptoNow. Nine years researching, trading, and teaching crypto; BSCS from Virtual University of Pakistan. Every tax figure is checked against IRS and state revenue publications. Our editorial policy.