Buying in your IRA can permanently destroy your tax loss — and nobody will tell you
By the Wash-Sale Guardian team · Published 2026-07-12 · Last updated 2026-07-14 · How we check our facts
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.
- It appears on no form. Wash-sale reporting on the 1099-B is per-account (the cross-account trap); IRA custodians don't report basis at all. This violation is invisible to every document you and your tax software receive.
- Roth counts too — a common misreading is that only traditional IRAs are covered. The ruling names both.
- Spousal IRAs are in scope for joint filers, per the same spousal logic IRS Pub 550 applies to taxable accounts.
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 every open danger window with its exact safe date. Runs in your browser; nothing is uploaded (privacy, methodology).
Frequently asked questions
Does the wash sale rule apply to Roth IRAs?
Yes. Rev. Rul. 2008-5 explicitly covers both traditional and Roth IRAs. A replacement purchase in either kind within the 61-day window disallows the loss permanently, and the ruling also blocks any basis increase in the IRA.
Is a wash sale loss in an IRA gone forever?
When the REPLACEMENT purchase happens inside the IRA — yes. A normal wash sale defers the loss into the replacement lot’s basis; an IRA has no taxable cost basis to carry it, so per Rev. Rul. 2008-5 the deduction is permanently lost.
Will my broker warn me before my IRA re-buys a stock I sold at a loss?
No. Your taxable broker cannot see the IRA purchase (even at the same firm, wash-sale reporting is per-account), and IRA custodians don’t report cost basis at all. The violation appears on no 1099 you receive.