Thirty-Day Wash Rule Law and Legal Definition

Thirty day wash rule is an Internal Revenue Service regulation prohibiting a taxpayer from claiming losses on the sale of an investment, if the same investment is purchased within 30 days before or after the date of sale. The 30 day wash rule helps to prevent investors from taking tax deductions on losses they do not actually incur. The purpose of the rule is to discourage investors from selling at a loss just to get the tax benefit.