US crypto wash sale rule in 2026: coins, tokens and Form 1099-DA

The US wash-sale rule is often reduced to “crypto is exempt,” but that is now too broad. Internal Revenue Code Section 1091 applies to losses on stock or securities. An ordinary payment or utility token is not brought into Section 1091 merely because it is a digital asset, while a tokenized security treated as stock or a security can be covered. Final IRS instructions for 2026 Form 1099-DA expressly provide wash-sale reporting for covered tokenized securities. Correct software must classify the asset before testing the 61-day window.

What Section 1091 actually says

Section 1091 disallows a loss on the sale or other disposition of shares of stock or securities when the taxpayer acquires, or enters into a contract or option to acquire, substantially identical stock or securities during the period beginning 30 days before the sale and ending 30 days after it. Including the sale date, practitioners commonly call this a 61-day window.

The rule is a loss-deferral mechanism in the ordinary replacement-property case, not a rule that makes the sale nontaxable. The loss is disallowed on the sold units, added to the basis of the replacement units and the relevant holding period carries over. If only part of the sold position is replaced, the adjustment is limited to matched units.

Section 1091 does not say “all property” or “all digital assets.” The first control is therefore legal asset classification. A report that applies a generic wash-sale flag to Bitcoin, tokenized shares, NFTs and derivatives alike is not applying the statute correctly.

Ordinary crypto is different from a tokenized security

The IRS's final 2026 Form 1099-DA instructions identify “dual classification assets that are tokenized securities.” They include an asset representing an interest in another security otherwise subject to Form 1099-B reporting and certain SEC-registered assets. The instructions require wash-sale loss reporting in box 1i where applicable.

This does not establish that every token described as a “security” in marketing language is within Section 1091, or that every token found to be an investment contract under securities law receives identical tax treatment. Preserve the instrument, issuer documents and identifier.

How the 61-day matching calculation works

Assume 100 units of a tokenized share cost USD 1,000 and are sold for USD 600, creating a USD 400 loss. The taxpayer purchases 75 substantially identical units within 30 days. The loss attributable to 75 replacement units, USD 300 in this simple example, is disallowed and added to their basis. The remaining USD 100 loss is not disallowed by that replacement purchase.

1. Identify each loss sale of stock or securities.
2. Search acquisitions from 30 days before through 30 days after the sale.
3. Test whether the replacement is substantially identical.
4. Match replacement quantity to sold quantity under the applicable ordering rules.
5. Disallow the matched loss.
6. Add the deferred loss to replacement basis.
7. Carry the relevant holding period to the replacement.

“Substantially identical” is more exacting than “correlated.” Rebuying the same tokenized share is the clear case. A different issuer, index, wrapper or derivative requires legal and economic analysis. Software should not convert a similarity score into a final tax conclusion.

Purchases in the 30 days before a loss sale count too. Year-end review must therefore span both calendar years. A 20 December sale can be affected by replacement units purchased through 19 January, and an early-January sale can be affected by December acquisitions.

Form 1099-DA does not replace the taxpayer calculation

For sales after 2025, the 2026 Form 1099-DA instructions expand broker reporting, including basis information for covered digital-asset securities. For tokenized securities, box 1i reports a wash-sale loss when required. The mandatory same-account calculation is narrower than the taxpayer's complete Section 1091 obligation.

The IRS explains that a broker generally identifies the wash sale where the sold and replacement covered security has the same CUSIP and is purchased in the same account. The broker may not see:

• a replacement purchase at a second broker;
• a purchase in another account or a spouse's account;
• a wallet or decentralised venue outside the broker's records;
• a contract or option to acquire the replacement;
• customer-provided history that the broker cannot use for basis reporting.

Therefore a blank box 1i is not proof that no wash sale exists. Conversely, Form 1099-DA proceeds and basis must be reconciled rather than duplicated with exchange CSV rows. Use the broker form for reporting status and the full ledger for the taxpayer calculation.

Rewards and staking payments are not reported on Form 1099-DA according to its instructions. That does not make them tax-free; they require their own income analysis.

Can an ordinary crypto loss still be harvested?

Where an ordinary coin is property but not stock or a security for federal tax purposes, Section 1091 generally does not itself defer a same-coin repurchase loss under current law. That is narrower and safer wording than promising a permanent “crypto loophole.” Congress can change the statute, and the legal nature of a token can change or be uncertain.

The sale still must be genuine and accurately reported. Record the disposition, proceeds, cost basis, fees and reacquisition as separate events. Market exposure, spreads, exchange risk and state-tax effects may outweigh the federal timing benefit. A report should calculate the realised loss; it should not tell every user to repurchase immediately.

Specific identification must be adequate and timely under the digital-asset basis rules. For dispositions after 2024, wallet/account allocation and identification requirements matter. A year-end tax-loss strategy cannot retroactively choose convenient lots after seeing the result.

Wash sales are not the only loss limitation

Even when Section 1091 does not apply to an ordinary token, other rules can affect a claimed loss:

• Related-party sales: Section 267 can disallow a loss on a direct sale to a related person; its consequences differ from an ordinary wash-sale basis adjustment.
• IRA replacement: IRS Revenue Ruling 2008-5 addresses stock sold at a loss and repurchased by an IRA. The loss is disallowed and is not added to the IRA's basis, making the result potentially permanent.
• Straddles: Section 1092 can defer losses where offsetting positions exist.
• Constructive-sale and contract rules: derivatives and hedges can invoke rules outside ordinary spot-property treatment.
• Economic substance and sham transactions: a paper entry without a real disposition is not protected by the absence of Section 1091.
• Capital-loss limits: net capital losses remain subject to the annual individual deduction and carryforward rules.

State conformity can also differ. The federal report should preserve state, residency and entity information rather than presenting one national optimisation result as the final return.

Software workflow for a defensible wash-sale review

1. Reconcile every exchange, broker and self-custody wallet.
2. Classify the asset before applying Section 1091.
3. Identify tokenized stock, debt and other possible securities.
4. Calculate loss sales using the selected and documented tax lots.
5. Search the full 61-day window across all accounts.
6. Match quantities and substantially-identical instruments.
7. Adjust replacement basis and holding period.
8. Reconcile Form 1099-DA box 1i without duplicating sales.
9. Test related-party, IRA, straddle and derivative issues separately.
10. Carry unresolved classifications to review instead of assuming exemption.

The US capital-gains guide explains the underlying disposal calculation, while the US calculator guide covers lot identification and missing basis. Information reporting is discussed separately in the global reporting guide.

Frequently asked questions

Official US sources

• US Code: 26 USC 1091
• IRS: 2026 Instructions for Form 1099-DA
• IRS: Schedule D instructions and wash sales
• IRS: digital-asset transaction FAQ
• IRS Revenue Ruling 2008-5: IRA wash sale

Official-source review completed 1 September 2026. The reviewed US Code text contains laws in effect on 27 August 2026.

Disclaimer: This article is for general informational purposes only and does not constitute tax advice. For individual tax advice, consult a licensed tax professional.