Wash sales and crypto: not covered today, but a bill reaches back to Sept 14
Section 1091 covers stock and securities, not crypto held directly. A House bill would change that from its introduction date in September 2026.
What this means for you: under current US law you can generally sell crypto at a loss and buy it straight back without the wash sale rule deferring the loss. But a bill approved by the House Ways and Means Committee would extend the rule to most crypto, and as introduced it reaches sales after September 14, 2026 [3][4][5]. Harvesting losses this quarter carries legislative risk.
The rule today
Section 1091 disallows a loss on a sale of stock or securities if you acquire substantially identical stock or securities within 30 days before or after the sale. The disallowed loss is not lost: it is added to the basis of the replacement shares [1]. The rule also covers contracts or options to acquire or sell stock or securities, and it does not apply to dealers in the ordinary course of business [1].
The IRS treats virtual currency as property, not currency or securities [2]. The Joint Committee on Taxation's September 2026 description of present law notes that digital assets are not expressly within section 1091, that the IRS has issued no guidance applying it to them, and that foreign currency and commodities have been held outside the rule [3]. Commentators generally agree the rule does not reach crypto under current law [8].
Where it can already bite
- Tokenized securities: a token that is itself a stock or security stays inside section 1091, and brokers report wash sale losses on such tokens in box 1i of Form 1099-DA [6].
- Shares and options: exposure held through shares, or contracts and options on stock or securities, is covered by the existing statute [1].
- Economic substance: the codified doctrine respects a transaction only if it meaningfully changes your economic position apart from tax and has a substantial non-tax purpose [7]. A sale and immediate repurchase with no change in exposure invites that question; outcomes depend on facts, and we found no IRS ruling applying it to a crypto harvest.
What the pending bill would do
The Digital Asset Tax Certainty Act, H.R. 10357, was introduced on September 14, 2026 and approved by the Ways and Means Committee 38-5 on September 16 [4][5]. Section 301 would rewrite section 1091 to cover specified assets: stock and securities as today, plus any traded digital asset other than a qualified US dollar stablecoin, plus contracts and options on them [3][4].
A traded digital asset is, broadly, a fungible asset with quotations readily available on an exchange that is not a tokenized asset [3]. A tokenized or wrapped asset that is economically equivalent to another asset would be treated as substantially identical to it [3][4]. That matters for wrapped tokens: selling a token at a loss while holding or buying its wrapped twin could be caught.
Acquisitions from staking, mining and similar validation activity, and acquisitions that are part of a regular series taken into ordinary income, would not count as replacement purchases [3][4]. For taxpayers whose functional currency is not the dollar, qualified dollar stablecoins would stay in scope [3]. The same title would also extend the constructive sale rules to digital assets [4].
The effective date is the trap
As introduced, the wash sale change applies to dispositions after the date of introduction, which was September 14, 2026 [3][4]. A transition rule would let brokers report basis without regard to section 1091 for sales before January 1, 2028 [4], so your 1099-DA may not show a disallowed loss even if the rule applies to you. An earlier stand-alone bill, H.R. 9172 from June 2026, used the same approach, and the PARITY Act and the Lummis bill in the Senate have also proposed extending the rule [8].
As of October 2026 the bill has not passed the House or Senate and is not law. Its terms, including the effective date, may change; check the version reported by the committee before relying on any date.
- Hold 100 units of Token X with basis $20,000; market value falls to $12,000
- October 20, 2026: sell all 100 for $12,000; realized loss $8,000
- October 22, 2026: buy 100 units back for $12,100
- Current law: $8,000 loss recognized; new basis $12,100
- If section 1091 is extended as introduced: $8,000 loss disallowed now; new basis $12,100 + $8,000 = $20,100; holding period of the old units carries over
- The loss is deferred, not destroyed, but your current-year tax estimate would be wrong by $8,000 of loss
What to do
- Flag any sale at a loss since September 14, 2026 followed or preceded within 30 days by a repurchase of the same or a wrapped equivalent token.
- Model year-end estimates both ways until the bill's fate and effective date are settled.
- Keep the lot-level records needed to adjust basis and holding period if the rule applies.
- Do not assume a 1099-DA will catch it; the proposed broker transition rule means it may not.
- Document a business reason and real change in exposure for any harvest you do.
- Revisit after the House floor vote and any Senate action.
This is general information, not tax advice.
Sources
- 26 U.S. Code § 1091 - Loss from wash sales of stock or securities (Legal Information Institute, Cornell Law School)
- Frequently asked questions on virtual currency transactions (Internal Revenue Service)
- Description of H.R. 10357, the Digital Asset Tax Certainty Act (JCX-47-26) (Joint Committee on Taxation (hosted by House Committee on Ways and Means))
- H.R. 10357 (IH) - Digital Asset Tax Certainty Act (U.S. Government Publishing Office (govinfo))
- Historic Digital Asset Tax Legislation Advances to Keep America the Crypto Capital of the World (House Committee on Ways and Means)
- Instructions for Form 1099-DA (2026) (Internal Revenue Service)
- 26 U.S. Code § 7701 - Definitions (Legal Information Institute, Cornell Law School)
- A Comprehensive Guide to Digital Asset Tax Legislation (KPMG (Journal of Taxation of Financial Products, vol. 23, no. 2))
General information for finance teams, current as of publication. Not legal, tax or accounting advice.