The wash-sale rule in four facts

Every loss-harvesting program, from a robo-adviser to a direct-indexing account with 500 stocks, lives inside one rule. Sell a security at a loss and buy the same thing, or something “substantially identical,” within 30 days before or after, and the loss is disallowed. The 61-day window looks like this.

1. 30 days before A purchase of the same security in this window already taints the sale.
2. Sale day You sell at a loss.
3. 30 days after Buy it back in this window and the loss is disallowed. It is added to the new lot's cost basis instead, so it is deferred, not lost.
4. Day 31 The window closes. Repurchase freely.

The rule is old and simple in a single account. It bites households in four places that are not obvious.

1. It reaches every account you control, including your spouse’s

The window covers purchases in any account the household controls: your other brokerage account, a joint account, your spouse’s account. A loss sold in one and repurchased in another is still a wash sale.

2. A repurchase inside an IRA forfeits the loss for good

In a taxable account a disallowed loss is only deferred; it gets added to the basis of the replacement shares. Buy the replacement inside an IRA and there is no basis to add it to. The IRS ruled in 2008 that the loss is gone permanently. Automatic 401(k) purchases of the same fund you just harvested in a taxable account fall into this trap.

3. Your broker only checks its own account and the exact same security

Brokers must report wash sales on Form 1099-B only when the sale and the repurchase happen in the same account and involve the same security identifier. Anything across accounts, across brokers, or across two different funds is invisible to them. That matching is your job, on Form 8949 with a code W, and no custodian will flag it.

4. Nobody knows whether two ETFs on the same index are “substantially identical”

There is no IRS ruling, regulation, or court case on whether two funds tracking the S&P 500 from different sponsors count as identical. Practitioners treat a swap between two same-index funds as a wash sale and a swap to a different index as defensible. That position rests on the absence of guidance, not on anything that says it is right. Harvesting programs are built around it.

What this means for a harvesting program

A direct-indexing engine tracks wash sales inside the account it manages and nowhere else. The gap sits at the household level: the retirement account buying an index fund every payday, the spouse’s account holding the same stocks, the second broker. Someone has to look across all of them, and today that someone is the taxpayer or nobody.