Does the Wash Sale Rule Apply to Crypto in 2026? The Rules, Explained

No — as of September 2026, the wash sale rule does not apply to cryptocurrency. You can currently sell crypto at a loss, buy it back immediately, and still claim the tax loss. But that loophole is under serious threat: on September 16, 2026, the House Ways and Means Committee voted 38–5 to advance a bill that would extend wash-sale rules to digital assets. Here’s the current rule, what’s changing, and what to do about it.

This is general information only — not tax advice. Crypto tax rules are complex and changing; consult a qualified tax professional for your situation.

What Is the Wash Sale Rule?

The wash sale rule (Section 1091 of the tax code) says: if you sell a stock or security at a loss and buy a “substantially identical” one within 30 days before or after the sale, you can’t claim the loss on your taxes right now. The disallowed loss isn’t gone forever — it gets added to the cost basis of the replacement shares — but you lose the immediate deduction. The rule exists to stop investors from harvesting tax losses while keeping their position.

Example with stocks: you sell 10 shares of XYZ at a $1,000 loss and rebuy them a week later. The $1,000 loss is disallowed; instead, your new shares’ cost basis increases by $1,000.

Why Crypto Has Been Exempt

The IRS treats cryptocurrency as property, not a security (a position dating back to IRS Notice 2014-21). Since Section 1091 only covers “stocks and securities,” digital assets fall outside it. That’s the entire basis of the so-called crypto wash-sale loophole:

• Sell Bitcoin at a $5,000 loss on Monday.
• Buy it back five minutes later — same position, same exposure.
• Claim the $5,000 loss to offset gains (plus up to $3,000 of ordinary income; excess carries forward).

This strategy — tax-loss harvesting — is fully legal for crypto under current law, and it’s one of the most-used year-end tactics by crypto investors.

The Bill That Could End It: The Digital Asset Tax Certainty Act

Congress has tried to close this loophole for years. The latest attempt, the Digital Asset Tax Certainty Act (H.R. 10357), is the furthest one has ever gotten:

• September 16, 2026: the House Ways and Means Committee advanced it 38–5 — a bipartisan landslide.
• What it does: extends Section 1091 wash-sale rules (and Section 1259 constructive-sale rules) to digital assets for the first time.
• Proposed start: the bill’s language points to a September 14, 2026 effective date — which matters if you’re harvesting losses right now.
• Stablecoin carve-out: qualifying U.S. dollar-pegged stablecoins (like USDC) would be exempt — routine stablecoin transactions won’t trigger wash-sale headaches.
• Status: NOT law yet. It still needs a full House vote, Senate passage, and a presidential signature. It may never become law.

The bill does more than wash sales: a $10 de minimis exemption for blockchain network fees, clearer stablecoin accounting, relief for qualifying crypto loans, and standardized broker reporting.

Form 1099-DA: Reporting Is Already Tightening

Separately from the wash-sale fight, broker reporting is already here: beginning with 2025 transactions, brokers must report cost basis for covered digital assets on Form 1099-DA. The IRS is matching what brokers report against what you file. An exception from broker reporting is not an exception from your obligation to report — keep records of every transaction: dates, amounts, fair market values, and basis.

What Should Crypto Investors Do Now?

1. Harvest losses while it’s legal — under current law, year-end tax-loss harvesting still works for crypto. Document everything.
2. Watch H.R. 10357 — if it becomes law with a retroactive-style effective date, late-2026 loss harvesting could be affected. Don’t assume the window stays open.
3. Keep immaculate records — wallet-by-wallet tracking, 1099-DA forms, and transaction logs. This is where most crypto investors get hurt, not in the rules themselves.
4. Don’t confuse reporting with wash sales — even if the wash-sale rule never touches crypto, you still owe tax on gains and must report them.

Frequently Asked Questions

Can I sell crypto at a loss and rebuy it the same day to claim the loss?

Under current law (September 2026): yes. The wash sale rule doesn’t cover crypto, so same-day repurchase doesn’t disallow the loss. Monitor the Digital Asset Tax Certainty Act — that could change.

Does the wash sale rule apply to NFTs?

Same answer as crypto: NFTs are treated as property/collectibles, not securities, so Section 1091 doesn’t currently apply. Proposed legislation targets “digital assets” broadly, which could eventually include them.

What happens if the bill passes — do I lose my harvested losses?

The bill’s proposed effective date matters enormously and is still subject to change as it moves through Congress. Losses harvested before any enacted effective date should stand, but the retroactive-style September 2026 date in the current draft is exactly why you should watch this closely and talk to a tax professional before year-end moves.

Sources

• IRS guidance on digital assets treated as property (Notice 2014-21 framework)
• House Ways and Means Committee markup of H.R. 10357, September 16, 2026 (38–5 vote)
• IRS Form 1099-DA broker reporting requirements (2025 transactions onward)

Related reading: How to Buy Bitcoin: Beginner’s Guide 2026 · What Is the S&P 500? Complete Guide

Not tax advice. Consult a qualified tax professional.

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Bull Lounge is an independent financial education publication. Our team breaks down markets, retirement planning, and tax strategy into plain English for investors in their 40s, 50s, and 60s — no hype, no jargon, verified numbers only.