Wash Sales Active Trading
- Thread starter Rookie86
- Start date
hi, i started this year, i do scalping. I might hit a stock 50 times in a day. Some trades don't work, that's why i'm worried about wash sales. I'm up 10k at the moment, but my fear is, I might really have nothing, or less from wash sales. Is this scenario possible?
You won't be able to claim the losses in a wash sale unless you close the entire position out prior to 2022.
No.
Example: (SAME STOCK/SECURITY)
Buy for 100 then sell for 80 = loss of 20.
Hour later you buy at 70 then sell at 75 = profit of 5.
For tax purposes, the loss of 20 is not allowed (wash rule) but you're allowed to add the loss to the cost of your next purchase so 70 purchase is recorded as 70+20 so buy at 90 and sell at 75 = loss of 15. Total tax loss is 15 either way.
***If your second purchase was 35 days later, then the loss of 20 is allowed and the 2nd trade is reported as a separate trade.
***Wash sales really only affects total P/L if 2nd trade is carried into a new calendar year.
***As a daytrader, you can ignore wash rule. It won't affect taxes at end of year.
If you're adding the cost to the next trade, couldn't you end red on the year from wash sales? In the trading platforms you see you're green since it doesn't calculate your pnl based on wash sales. If it's really adjusting the cost per trade, isn't it possible to actively trade your account into the red from wash sales despite being in the green before the wash sales are applied?
Wash sales just defer the loss, they don't cancel a loss.
As a daytrader, the only time you would want to think about this rule is in December & January.
If you continually trade the same stock throughout the year, you should close any position in the stock in Dec. and don't trade it for at least 30 days otherwise you could have accumulated wash sale losses for several months if you didn't ever leave at least 30 days between trades.
If you allow losses to carry into the next year, then yes, you could have taxes to pay on your trades even if your total year was a loss if wash sales were allowed.
***I should have clarified the Dec/Jan issue in my previous reply.
you will not end red on the year from wash sales. No sir.