Wash sale FAQ
IRA purchases, spouse accounts, DRIP pitfalls and the “substantially identical” gray area — with citations.
Does buying in my IRA or Roth IRA trigger a wash sale?
Yes, according to the IRS. In Revenue Ruling 2008-5 the IRS ruled that if you sell stock at a loss in a taxable account and, within 30 days, cause your IRA or Roth IRA to buy substantially identical stock, the loss is disallowed under §1091 — and your basis in the IRA is not increased, so the loss is effectively gone. Pub. 550 lists IRA/Roth IRA purchases as wash-sale purchases and excludes them from the basis add-back. Watch automatic IRA contributions and target-date or index purchases during the window.
What about my 401(k) or other workplace plan?
Rev. Rul. 2008-5 addresses IRAs specifically. How the rule applies to purchases inside a 401(k) or similar plan is not spelled out in that ruling; many practitioners take a cautious view. If your plan buys the same fund you sold, ask a tax professional.
Do my spouse’s purchases count?
Pub. 550 says: “If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.” The statute itself does not mention spouses; this is the IRS’s stated position. Coordinate across both spouses’ taxable accounts, IRAs and automatic investments. (Pub. 550)
How do dividend reinvestments (DRIP) cause wash sales?
A reinvested dividend is a purchase. If an ETF you sold at a loss pays a dividend that is reinvested within 30 days before or after the sale — in any account you or your spouse control — part of the loss can be disallowed. Because the reinvested amount is usually small, typically only a matching number of shares’ loss is disallowed (IRC §1091(b); Pub. 550 “More or less stock bought than sold”). Turn off DRIP for the fund in every account before selling, and remember December is a common ETF distribution month.
Is VOO substantially identical to VTI? To IVV?
VOO and IVV both track the S&P 500, so most practitioners treat them as high risk. VOO (S&P 500) and VTI (a total-market index) track different indexes and are widely used as a tax-loss harvesting pair, but the IRS has never ruled on specific ETF pairs. Pub. 550 says you must “consider all the facts and circumstances.” SwapFinder shows index identity, correlation and holdings overlap so you can discuss specifics with your tax professional.
Are two funds that track the same index from different issuers ‘substantially identical’?
There is no published IRS ruling. Because they hold essentially the same securities in the same weights, many practitioners consider them the highest-risk swaps. We list them under “Avoid”.
What about leveraged ETFs like TQQQ, UPRO or SSO?
Leveraged funds that track the same index as your fund (e.g. QQQ → TQQQ, or UPRO → SPXL) may still be considered substantially identical by some, despite different leverage or issuer. We flag them and never suggest them as replacements for unleveraged funds. Leveraged and inverse funds reset daily and are not long-term substitutes.
Can I buy the replacement fund immediately?
Yes — that is the point of a swap. The waiting period applies to buying back the fund you sold (or anything substantially identical to it). Our calendar shows the 30-days-before look-back and the earliest repurchase date (day 31).
Does my broker catch wash sales for me?
Brokers report wash-sale adjustments on Form 1099-B, generally only for the identical security within the same account. Purchases in another account, your spouse’s account, an IRA, or a ‘substantially identical’ different fund are your responsibility to track.
How much loss can I deduct?
Net capital losses can offset capital gains, and up to $3,000 per year ($1,500 if married filing separately) of excess loss can offset other income, with the rest carried forward (IRC §1211(b), §1212(b); see Pub. 550 “Capital Losses”).
Do wash sales apply to options?
Yes. §1091(a) covers entering into “a contract or option so to acquire” substantially identical securities, and Pub. 550 lists acquiring a contract or option to buy as a wash-sale trigger. Selling deep in-the-money puts can also raise issues.
Do I need to sign up?
No. SwapFinder is a static website: no account, no tracking of your tickers, and the calendar runs entirely in your browser.
Sources: IRC §1091 · IRS Publication 550 · Rev. Rul. 2008-5 · Treas. Reg. §1.1091-1.