Wash sale rules prevent you from claiming a loss if you repurchase the same or substantially identical asset within 30 days.
For stocks and securities, this is law. For NFTs, it’s currently unclear—and that creates both opportunity and risk.
How Wash Sales Work for Stocks
You sell 100 shares of Apple at a loss. If you buy 100 shares of Apple again within 30 days (before or after the sale), the loss is disallowed.
The loss doesn’t disappear—it gets added to the cost basis of the repurchased shares, delaying the deduction until you sell again (and wait 30 days).
Do Wash Sales Apply to NFTs?
The wash sale rule (IRC Section 1091) explicitly applies to “stocks or securities.”
NFTs are not stocks or securities under current law. They’re classified as property (like collectibles or real estate).
The IRS hasn’t issued guidance saying wash sales apply to NFTs.
This means: Technically, you could sell an NFT at a loss and buy it back the same day without triggering wash sale rules.
The Audit Risk
Just because wash sales don’t legally apply doesn’t mean the IRS won’t challenge aggressive strategies.
You sell Bored Ape #1234 at a $50,000 loss and buy Bored Ape #5678 the next day. Both are floor apes with similar traits.
The IRS could argue these are “substantially identical” assets and disallow the loss under substance-over-form principles, even though the rule technically doesn’t apply to NFTs.
What “Substantially Identical” Might Mean for NFTs
For stocks, “substantially identical” is clear: Apple shares are fungible.
For NFTs, each token is technically unique. But:
Low risk:
- Sell a Bored Ape, buy a CryptoPunk (different collections, clearly not identical)
- Sell an Azuki, buy a Doodle (different art, different utility)
Medium risk:
- Sell a floor Bored Ape, buy another floor Bored Ape (same collection, similar traits)
- Sell Pudgy Penguin #100, buy Pudgy Penguin #200 with identical traits
High risk:
- Sell an NFT to a wallet you control, buy it back immediately
- Coordinated wash trading with a counterparty
The IRS hasn’t ruled on this, so there’s no clear line.
Conservative Approach: Treat NFTs Like Wash Sales
If you want zero audit risk, follow wash sale rules voluntarily:
- Sell an NFT at a loss
- Wait 31 days before buying back the same collection
- If you must re-enter the collection sooner, buy a clearly different NFT (different rarity tier, different traits)
This delays your tax benefit by a month but eliminates questions.
Aggressive Approach: NFTs Are Property, No Wash Sales
Some tax professionals argue NFTs are property, so wash sales don’t apply.
Under this view:
- Sell NFT A at a loss today
- Buy NFT B from the same collection tomorrow
- Claim the loss immediately
This is technically defensible under current law but carries risk if the IRS challenges it or issues future guidance.
What Might Change
The IRS could:
- Issue a ruling that NFTs are subject to wash sales
- Propose new regulations treating “substantially similar” NFTs as triggering wash sales
- Apply wash sale rules retroactively (unlikely but possible)
If you’re taking aggressive positions now, be aware that guidance could shift.
Action Step
Decide your risk tolerance:
Conservative: Wait 31 days between selling one NFT and buying a similar one from the same collection.
Moderate: Wait 31 days for floor pieces, but different rarity tiers or different collections can be immediate.
Aggressive: Treat NFTs as property with no wash sales, but document why each NFT is unique (different token ID, different traits, different art).
Document your reasoning. If audited, you want to show you applied a consistent, reasonable interpretation—not that you ignored the issue.
Most tax professionals recommend waiting at least a few days between selling and repurchasing similar NFTs, even if wash sales don’t technically apply. It reduces audit flags and shows good faith.
NFT wash sale treatment is one of the biggest gray areas in crypto tax law. The safe play: follow the rules as if they apply. The risky play: exploit the loophole while it exists. Choose based on your audit risk tolerance.