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Cryptocurrency wash sale rule
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A wash sale occurs when you incur a capital loss, and then buy a replacement stock or security within a 30-day window before or after the capital loss is incurred. For example, let’s say you buy a Google stock for $1,000 on January 1, sell it for $800 on January 10.
You have incurred a capital loss of $200. Let’s say however than within 30 days (before or after) January 10 (even if it falls on a separate taxable year), you buy another Google stock — that is considered a wash sale and you cannot deduct the capital loss.
Wash sales are in place to prevent people from taking losses in one tax year and then immediately buying back into the stock.
There is some debate as to whether wash sales apply to cryptocurrency sales, however the IRS specifically states that wash sales only apply to stocks and securities.
Can you use wash sales to offset cryptocurrency gains? Probably
Since the IRS has also issued guidance that cryptocurrencies are property, CoinTracker does not calculate/apply wash sales. You should consult your CPA or tax professional for further advice on whether to apply wash sales to your cryptocurrency trades.
Note: in Canada, wash sales (i.e. superficial loss rule) do apply to cryptocurrency (more details).