Buying in your IRA can permanently destroy your tax loss — and your broker isn't required to tell you

Short answer: if you sell at a loss in a taxable account and your traditional or Roth IRA buys substantially identical shares within 30 days before or after, the loss is permanently disallowed. Not deferred — destroyed. That is the holding of Rev. Rul. 2008-5, and it is the single most expensive wash-sale variant because there is no basis adjustment to recover it later.

Why the IRA case is different from a normal wash sale

An ordinary wash sale under IRC §1091 is annoying but survivable: the disallowed loss is added to the basis of the replacement shares, the holding period tacks on, and you recover the loss when you eventually sell them cleanly — mechanics here. An IRA breaks that machinery. IRA holdings have no cost basis in the taxable sense, so there is no replacement lot to carry the loss forward. Rev. Rul. 2008-5 closes the loop by ruling the loss disallowed and the IRA's basis unchanged: the deduction simply ceases to exist. It even fails the intuitive "I'll get it back at distribution" hope — you won't.

Why this one catches careful people

• Auto-invest and dividend reinvestment don't check your other accounts. Your IRA's scheduled monthly buy has no idea you harvested that same fund in taxable nine days ago. A DRIP purchase counts as an acquisition inside the 61-day window.
• Your 1099-B may not show it. Brokers must report wash sales on the 1099-B only within a single account, though they may report more (the cross-account trap); IRA custodians don't report basis at all. Check what your 1099-B shows, because the paperwork you and your tax software receive may not flag this violation.
• Roth counts too — a common misreading is that only traditional IRAs are covered. The ruling names both.
• A spouse's IRA is an open question. Pub 550 makes a spouse's purchase your wash sale, so the loss is disallowed. But Rev. Rul. 2008-5 addresses only an individual who "causes his or her individual retirement account or Roth IRA" to buy the replacement, and it states that it "does not address any issues other than those specifically addressed herein" — so whether the basis adjustment is lost the way it is in the own-IRA case is not settled by the ruling. Plan as if the loss could be gone (don't re-buy in a spouse's IRA inside the window), and let a CPA or EA decide how to report it if it has already happened.

A concrete example

July 5: you sell 100 shares of NVDA in your Schwab taxable account at a $4,000 loss, planning to harvest it. July 18: your Fidelity Roth IRA's automatic investment buys 60 shares of NVDA. Result under Rev. Rul. 2008-5: 60% of your loss — $2,400 — is permanently disallowed. The remaining $1,600 (the 40 unreplaced shares' portion) survives. Nothing you do later changes the $2,400; it is gone in every future year.

The defense is boring: know your windows

Before any account of yours (or your spouse's) buys a ticker, you need to know whether a 30-day window from a loss sale is still open. That's bookkeeping, and it's exactly what our free checker automates: drop CSVs from all your accounts (walkthroughs: Robinhood, Schwab, Fidelity, IBKR, E*TRADE), tag which are IRAs, and IRA-absorbed violations are flagged in their own unmissable "PERMANENT" category — plus the open danger windows, each with the first day a re-buy no longer washes the loss, in the files you import. Runs in your browser; nothing is uploaded (privacy, methodology).

Frequently asked questions