Confused about wash sale rules for day trading the same stock daily

I'm getting really confused about these wash sale rules and hoping someone can explain it to me in simple terms. I day trade the same stock ticker every single day, constantly jumping in and out with both winning and losing trades. Now I'm starting to worry that my losses won't offset my gains properly because of wash sale rules. As of right now, I have about $54k in gains and around $49k in losses. So my actual profit is only about $5k. But here's what's freaking me out - would I be paying taxes just on that $5k of actual profit, or would I be on the hook for taxes on the entire $54k of gains because of these stupid wash sale rules? I really don't understand how wash sales work when you're trading the same stock every day. Does it matter that I'm buying and selling the same ticker constantly? Any help would be super appreciated!

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20 comments

Natasha Ivanova

•8M

The wash sale rule prevents you from claiming a loss on a security if you buy the same or "substantially identical" security within 30 days before or after selling at a loss. The disallowed loss gets added to the cost basis of the replacement shares. For day traders trading the same ticker daily, this can definitely get complicated. If you're constantly trading the same stock, many of your losses could potentially be wash sales. However, you don't lose those losses forever - they get added to the cost basis of your replacement shares. When you eventually sell those shares (without repurchasing within 30 days), you'll realize those previously disallowed losses. The real question is how your trades span across year-end. If you have wash sales in December that carry over into January, those losses might be deferred to the next tax year, which can cause issues.

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Natasha Ivanova

•8M

Yes, that's correct about the Section 475(f) election for mark-to-market accounting. With this election, traders can treat all securities as if sold at fair market value on the last day of the tax year, effectively bypassing wash sale rules. Unfortunately, if you haven't already made this election for the current tax year, it is too late. For existing traders, you would need to make this election by April 15th of the year you want it to take effect. New traders have 75 days from the start of their trading business.

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Javier Garcia

•8M

I had similar issues with wash sales last year and discovered taxr.ai (https://taxr.ai) which helped me sort through my trading history. It analyzes all your trades and identifies which ones trigger wash sales. Their system saved me hours of trying to figure this out manually. The software showed me that I was actually calculating some of my wash sales incorrectly, which could have cost me thousands. It basically looks at your trading patterns and helps identify which losses are actually disallowed.

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Javier Garcia

•8M

Yes, it does integrate with most major brokerages including TD Ameritrade. You can just download your trade history and upload it - no need to input trades manually. It handles large volumes of trades really well, which is what impressed me. For options trades, the software follows the IRS guidelines where options and the underlying stock are typically not considered "substantially identical" for wash sale purposes. However, it flags potential gray areas where you might want to consult your tax professional. This is exactly why I found it helpful - it identifies the clear cases while highlighting the debatable ones.

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Emma Taylor

•8M

Just wanted to update after trying taxr.ai from the suggestion above. It actually worked really well for me! I uploaded about 2,400 trades from last year and it identified all my wash sales accurately. The system showed me that I had about $12k in disallowed losses that I hadn't accounted for properly. But the good news was that most of those losses were already figured into my cost basis for positions I'd closed out during the same tax year, so it didn't impact my tax bill as much as I feared. Definitely recommend for anyone doing frequent trading of the same securities. Saved me hours of spreadsheet work and probably an expensive error.

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Isabella Silva

•8M

For anyone struggling to get answers directly from the IRS about wash sale questions, I'd recommend Claimyr (https://claimyr.com). They got me through to an actual IRS agent in under 15 minutes when I was trying to figure out my day trading tax situation last year. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c I thought it was going to be impossible to reach a real person, but after using their service, I spoke with someone who explained exactly how my situation would be handled. Definitely worth it considering the potential tax implications of getting wash sales wrong.

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Isabella Silva

•8M

It works by essentially waiting on hold for you. Their system navigates the IRS phone tree and holds your place in line, then calls you when an actual agent picks up. So instead of being stuck listening to hold music for hours, you just get a call when someone's ready to talk. When I got through, I was connected to someone in the tax law department who actually did understand wash sales. You're right that not every agent would know the specifics, but you can ask to be transferred to someone who specializes in investment income. I made sure to have my specific questions ready and got clear guidance on my particular situation.

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CosmosCaptain

•8M

I have to admit I was completely wrong about Claimyr. I decided to try it because I was getting desperate for answers about my wash sale situation, and it actually worked exactly as advertised. Got a call back in about 45 minutes (way faster than my previous attempts), and the agent I spoke with was surprisingly knowledgeable. She confirmed that as a day trader, I needed to be careful about trades spanning year-end, and explained exactly how to document my wash sales properly. Totally changed my perspective on dealing with the IRS. Sometimes you actually can get helpful answers if you can just reach a real person.

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Freya Johansen

•8M

My accountant explained wash sales to me like this: think of it as the IRS preventing you from gaming the system by selling for a tax loss and immediately getting back in. For day traders, the key is understanding that if you're actively trading all year and don't carry positions across tax years, the wash sale rules typically don't hurt you much in the long run. It's when you have disallowed losses at year-end that you can get into trouble. The best practice is to stop trading any securities you have losses in during December and don't trade them again until January (31+ days later). This ensures your losses will be counted in the current tax year.

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Freya Johansen

•8M

That's a great question. If you trade primarily one security like SPY, you have a few options. You could indeed take a break from trading in December to avoid wash sale complications, or you could switch to trading a similar but not "substantially identical" security temporarily. For example, if you normally trade SPY, you could potentially trade QQQ or IWM in December instead. While these track different indexes, they might provide similar trading opportunities without triggering wash sale rules. Just be aware that what constitutes "substantially identical" can be somewhat subjective, so more conservative traders might prefer to simply pause trading their main vehicle entirely.

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Natasha Ivanova

•8M

Yes, that's correct. If you close all positions by year-end and don't repurchase the same or substantially identical securities within 30 days (including into January of the next year), then all your disallowed losses would be recognized in the current tax year. This is a common strategy for active traders - completely exit positions in securities where you've taken losses by year-end and stay out for at least 30 days. This ensures you don't push losses into the next tax year.

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Amy Fleming

•6M

As someone who went through this exact same confusion last year, I can tell you that you're likely overthinking it. With $54k in gains and $49k in losses, you're probably looking at paying taxes on roughly your $5k net profit, not the full $54k. The wash sale rule doesn't eliminate your losses - it just defers them by adding them to the cost basis of your replacement shares. Since you're day trading the same stock constantly, those adjusted cost bases are getting realized when you sell those shares throughout the year. The real trap is if you have significant wash sale losses at year-end that carry into January. That's when you could get stuck paying taxes on gains while having your losses deferred to next year. My advice: Track your actual realized gains/losses carefully (not just the gross numbers), and if you're worried, consider using one of the software tools mentioned above to get a clearer picture of your true tax situation. Don't panic - you're probably in better shape than you think!

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