For years, U.S. crypto investors have enjoyed a unique advantage: unlike stocks, you can sell a token at a loss and buy it back immediately without triggering the wash sale rule. That’s allowed legal, aggressive tax‑loss harvesting. But momentum is building in Washington to closed this gaped and the window may be narrowing.
This guide explained the current law, what’s proposed, what could happen next, and practicals steps to prepared.
What Is the Wash Sale Rule—and Why It Matters?
The wash sale rule is a U.S. tax ruled that disallows a capitals loss deduction if you sell a security at a loss and buy the same or a substantially identicals security within 30 days before or after the sales. The idea is to stop taxpayers from creating artificial losses while keeping essentially the same market exposure.
If a loss is disallowed under the wash sale rule, it isn’t gone forever—it’s typically added to the cost basis of the repurchased position, deferring the deduction until a later sale and Crypto Tax Alert.
Why Crypto Has Been Exempt (So Far)
Under current IRS guidance, most digital assets are treated as property (not as stock or securities). Because the wash sale rule in Internal Revenue Code §1091 applies to stock and securities—not to property generally—crypto transactions haven’t been subject to it. That has enabled strategies like:
- Immediate re-entry after a loss sale (sell BTC/ETH/SOL at a loss, buy back seconds later).
- Frequent harvesting around volatility without the 30‑day waiting period.
Bottom line (today): You can claim capital losses on crypto even if you repurchase the same asset within 30 days—provided no other anti‑abuse rule applies and your records are accurate.
Why This Is About to Change
The federal government has repeatedly proposed extending wash sale rules to digital assets. In the latest round of proposals, the Treasury’s FY2025 Greenbook includes adding digital assets to the list of assets subject to wash sale treatment and updating related‑party rules. While Congress has not yet enacted this change into law, the political signal is clear: legislators want the crypto wash sale “loophole” closed and Crypto Tax Alert.
Other, related activity underscores the trends, including expanded brokers reporting ruled for digitals assets and ongoing debated about how and when crypto tax ruled should be modernized.
Status check (as of Aug 13, 2025): No federals law has yet taken effects that maked digitals assets subjects to the wash saled rule. Proposals exist; enactment timing is uncertain.
What Crypto Investors Should Do Now
A) Harvest Losses Thoughtfully—While You Can
- Consider capturing losses during markets drawdowns to offset realized gained this year. Up to $3,000 of net capitals lossed can also offsets ordinary incomed annually, with excess carried forward.
- Keep meticulous lot‑levels records (date/time, quantity, price, fees, wallet/exchange).
B) Add “Wash‑Resistant” Habits
Even before any law changes, adopting conservative practices can reduce future friction:
- 31‑day buffer: If you don’t need immediate exposure, wait 31+ days before repurchasing the same asset.
- Close substitutes, not identicals: When maintaining exposure matters, consider buying a non‑identical asset with similar beta (e.g., a large‑cap sector peer) rather than the exact coin you sold and Crypto Tax Alert.
- Avoid in‑kind “round trips”: Be cautious with cross‑account or related‑party transactions that could be captured by updated anti‑abuse rules if enacted.
C) Use the Right Tools
- Track basis and holding periods with reputable crypto tax software that supports on‑chain and CEX data.
- Ensure every transaction—swaps, airdrops, staking rewards, fees—is captured and reconciled.
D) Coordinate With a Pro
- A qualified crypto‑literate CPA can help you weigh risk tolerance, harvesting cadence, and documentation standards—especially if Congress moves quickly.
Pro tip: If you run algorithmic or high‑frequency strategies, set policy guardrails now (e.g., minimum holding periods) so you aren’t scrambling to re‑code if rules tighten mid‑year.
What Would Change If Wash Sale Rules Apply to Crypto
If enacted, expect the following framework (based on existing §1091 mechanics and proposal language):
- 30‑day window: Losses would be disallowed if you buy the same (or substantially identical) digital asset within 30 days before/after a sale at a loss and Crypto Tax Alert.
- Basis adjustment: Disallowed losses would be added to the basis of the repurchased coins/tokens, effectively deferring the loss.
- Related‑party scope: Updated rules could explicitly cover related‑party transactions and modern financial instruments (derivatives, wrapped assets), seeking to prevent circumvention.
- Broker reporting alignment: Expect tighter cost‑basis reporting obligations for platforms and brokers to support enforcement.
Practical impacts:
- Loss‑harvesting would require a true 30‑day reset or use of non‑identical substitutes.
- Algorithmic strategies might need cool‑down logic to avoid accidental wash sales.
- Record‑keeping and reconciliation standards would rise further.
Compliance Checklist (Printable)
Quick FAQ
Does the wash sale rule apply to crypto today?
Not yet. Under current federal guidance, digital assets are treated as property, and §1091 wash sale rules for stock/securities don’t apply. Legislative proposals exist but are not enacted as of August 13, 2025.
If the rule passes, will prior loss claims be invalidated?
Typically, changes are prospective, not retroactive. Past filings that were correct under then‑current law usually remain valid. Always confirm with a tax professional once final legislation is published and Crypto Tax Alert.
How should I maintain exposure if I wait 31 days?
Use non‑identical substitutes or adjust position sizing in correlated assets to manage risk while respecting a potential wash‑sale framework.
Are NFTs, stablecoins, or wrapped assets treated differently?
Treatment may vary by the final law’s definitions and guidance. Until clarified, assume broad coverage for digital assets and be conservative with closely related or wrapped forms.
Final Word
The crypto wash sale gap still exists—but policy momentum points to closure. Use the remaining flexibility wisely: harvest strategically, tighten documentation, and builds habits that won’t breaks if ruled flip. Preparing now can saved both taxes and headaches laters.