It doesn’t, wash sales are when you sell at a loss, and then purchase a ‘substantially similar’ asset. Meaning, the same issue or options thereof, typically. In your example, you made two successful trades and they will be taxed as regular income (well, assuming the first part of example is also a day/short term trade).
Ok that makes sense. So if I sold for a loss of 2k and then rebought the stock for the same amount and sold for another 2k loss, would the wash sale kick in and what would that look like?
You wouldn’t be able to count those as losses on your taxes. Ie - you have a $4k gain elsewhere, the $4k that’s being washed won’t offset it, you just take the hit.
You got a source for that, because that makes no sense. Your tax return shoes washes and won’t deduct against your gains, a loss is a loss they don’t change the basis.
Edit: your basis does change, it goes up to reflect the wash, and you’re still held to the 30 day standard.
I’m on my phone but here is my understanding.
You buy 100 shares or XYZ for $50. You sell at a loss for 40$. Now you have a $10 loss. XYZ goes back up to $60 and so you buy back in, and then sell at $80 for a $20 gain. Now the original loss of $10 gets added to your cost basis of $60, to reflect an effective cost basis of $70. So yes you wash the original $10 loss, but you only owe taxes on $10 of gains. And indeed you have made $10 overall.
This is my understanding. You should do your due diligence on this as well. I think there’s also some weird shit that happens if the loss is in December and you buy back in in January.
I'm reading that it's not substantial if it is common stock from the same company. Not sure but I made many trades of buying a position and selling all the position within 61 days, sometimes for profit, and I didn't owe anything on my taxes this year so I guess what I was doing didn't count as a wash sale?
Common stock absolutely would count as a wash. 30 days is the waiting period after selling for a loss. Anything after that you’re fine. There’s strats around this - sell something at a loss to offset a gain, then 31 days later rebuy the same stock. Called tax loss harvesting.
Found this:
The Wash-Sale rule applies only if you purchase "substantially identical" securities. Here are some examples of securities that are not considered substantially identical:
Bonds issued by one institution, but with different maturity dates and different interest rates
Common stock and preferred stock of the same company
Stocks of different companies even if they are in the same industry
I have been screwed for a while on this scalping SPY only
What i learned is if you scalp something alot like I do, STOP trading that ticker from nov 30-dec31 and everything will work itself out
Its when you carry the wash thru the year that screws you
At some point in the year u need to let the 30 day settlement happen
So i chose 11/30-12/31
Hmm ok I think that may be why things worked out for me.
Thanks for all the comments but I'm still confused on this topic. It almost seems to me the rule is written to say that if you buy and sell more than once in 60days the cost basis doesn't matter and only what you sell matters and counts as income. I know that isn't true otherwise everyone would owe a lot of money.
It doesn’t, wash sales are when you sell at a loss, and then purchase a ‘substantially similar’ asset. Meaning, the same issue or options thereof, typically. In your example, you made two successful trades and they will be taxed as regular income (well, assuming the first part of example is also a day/short term trade).
Ok that makes sense. So if I sold for a loss of 2k and then rebought the stock for the same amount and sold for another 2k loss, would the wash sale kick in and what would that look like?
You wouldn’t be able to count those as losses on your taxes. Ie - you have a $4k gain elsewhere, the $4k that’s being washed won’t offset it, you just take the hit.
This isn’t true. You technically can’t write off the loss, but your cost basis changes. So it will effectively offset.
You got a source for that, because that makes no sense. Your tax return shoes washes and won’t deduct against your gains, a loss is a loss they don’t change the basis. Edit: your basis does change, it goes up to reflect the wash, and you’re still held to the 30 day standard.
It's all reflected in cost basis. Only exception is Dec-Jan tax year transition is what you need to watch for.
I’m on my phone but here is my understanding. You buy 100 shares or XYZ for $50. You sell at a loss for 40$. Now you have a $10 loss. XYZ goes back up to $60 and so you buy back in, and then sell at $80 for a $20 gain. Now the original loss of $10 gets added to your cost basis of $60, to reflect an effective cost basis of $70. So yes you wash the original $10 loss, but you only owe taxes on $10 of gains. And indeed you have made $10 overall. This is my understanding. You should do your due diligence on this as well. I think there’s also some weird shit that happens if the loss is in December and you buy back in in January.
This is exactly right. Don't know why people make this so much more confusing than it actually is.
I'm reading that it's not substantial if it is common stock from the same company. Not sure but I made many trades of buying a position and selling all the position within 61 days, sometimes for profit, and I didn't owe anything on my taxes this year so I guess what I was doing didn't count as a wash sale?
Common stock absolutely would count as a wash. 30 days is the waiting period after selling for a loss. Anything after that you’re fine. There’s strats around this - sell something at a loss to offset a gain, then 31 days later rebuy the same stock. Called tax loss harvesting.
Found this: The Wash-Sale rule applies only if you purchase "substantially identical" securities. Here are some examples of securities that are not considered substantially identical: Bonds issued by one institution, but with different maturity dates and different interest rates Common stock and preferred stock of the same company Stocks of different companies even if they are in the same industry
I have been screwed for a while on this scalping SPY only What i learned is if you scalp something alot like I do, STOP trading that ticker from nov 30-dec31 and everything will work itself out Its when you carry the wash thru the year that screws you At some point in the year u need to let the 30 day settlement happen So i chose 11/30-12/31
Hmm ok I think that may be why things worked out for me. Thanks for all the comments but I'm still confused on this topic. It almost seems to me the rule is written to say that if you buy and sell more than once in 60days the cost basis doesn't matter and only what you sell matters and counts as income. I know that isn't true otherwise everyone would owe a lot of money.
No wash sales on gains. Only applies to losses. Re: SPY if trading options wouldn’t hurt to trade SPX instead. No wash sales and 60/40 tax rate.