What counts as a substantially identical security for the wash-sale rule?

The IRS never gave a precise definition, which is why it causes confusion. Clearly identical: selling and rebuying the exact same stock or the exact same fund. Clearly fine: selling an S&P 500 fund and buying a total-market fund from a different provider tracking a different index, since they hold different baskets. The murky middle is two funds tracking the same index from different companies; many advisors treat these as too close to risk. Options and warrants on the same stock can also trip the rule. A common safe harvest is to swap a fund for a sibling that tracks a related but distinct index, keeping your market exposure while sidestepping the disallowed loss. When in doubt, choose a clearly different index.