Does The Wash Sale Rule Apply To Bitcoin?

Crypto trading is not easy business but we have tried to help you out as much as possible with our must read Bitcoin trading tips. While we are sure they have helped you in some way or the other, we also realize that concerns about Bitcoin trading go far beyond knowing just a few tips, tricks or hacks. Taxation, regulation, legality: these are important issues to consider when it comes to Bitcoin trading. One such issue is about how the wash sale rule interacts with Bitcoins. Does the wash sale rule apply to Bitcoins?

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Before we answer the question at hand, it is imperative to understand what the wash sale rule even is.

Without understanding the basics of it, it is absolutely impossible to figure out how the whole things works in context of Bitcoins. So, first things first:

What is The Wash Sale Rule?

In the United States, an existing rule by the IRS (Internal Revenue Service) lays down the wash sale rule.

According to this particular regulation, the loss incurred in a person’s asset sale will not be written off in the final taxation, IF that person buys an equivalent stock within a period of thirty days from the date of sale.

This particular rule is meant to make sure that nobody can fake a loss by selling off a stock, only to repurchase a similar stock to offset the original loss.

The rule applies to all asset purchases made by the seller, his/her spouse, his/her company within 30 days of making the original sale.

For disqualification under the wash sale rule, the newly purchased stock must be substantially identical to the one that had initially been sold off, within the 30 days gone by.

Bitcoin and The Wash Sale Rule

Given that Bitcoins still remain a fairly nascent area of investment, the IRS has not yet applied to the concept of the wash sale rule to Bitcoin.

Even though it is advisable to steer clear of closely timed sales and purchases, the wash sale rule does not apply to Bitcoins as of now.

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A lot of experts feel that it should indeed be applied to cryptocurrencies, but given how swiftly the Bitcoin price moves, because of the high volatility in the crypto market, it probably makes a lot of sense to not apply the wash sale window to the buying and selling of Bitcoins yet.

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