Thirty-day wash rule

Thirty-day wash rule

IRS rule stating that losses on a sale of stock may not be used as tax shelter if equivalent stock is purchased 30 days or less before or after the sale of the stock.

Thirty-Day Wash Rule

An IRS regulation stating that one may not claim a capital loss for tax purposes if one repurchases the same position within 30 days. Suppose one sells a stock at a substantial loss but immediately buys back the same stock at the same price. Effectively, the locked in loss is "unlocked" and one can still make a profit on the investment in the long term. The 30 day wash rule exists to prevent investors from taking tax deductions on losses they do not actually incur. Some investors find a way around this by exercising a tax swap. The 30 day wash rule should not be confused with wash trading, which is a different concept altogether.