What is the wash sale rule?

The wash sale rule prevents you from claiming a tax loss on a security if you buy a "substantially identical" security within 30 days before or after the sale. For example, if you sell a stock at a loss and repurchase it 15 days later, the IRS disallows the loss deduction. The disallowed loss is added to the cost basis of the repurchased shares instead of being immediately deductible.