Day trader seeking clarity on wash sale rules for same-stock daily trading

The wash sale rule prevents you from claiming a loss on a security if you buy a "substantially identical" security within 30 days before or after selling at a loss. But there's a key distinction for day traders. If you're just day trading the same stock and not holding positions overnight, each transaction is typically considered separate for tax purposes. You would only pay taxes on your net profit (the $6k difference between your gains and losses). However, if you're holding positions overnight or repurchasing within the 30-day window, then wash sale rules apply. In that case, the loss gets added to the cost basis of the replacement shares rather than being immediately deductible. For day traders who qualify as "traders in securities" with the IRS (trading frequently and regularly), there's also the option to use the mark-to-market accounting method, which can avoid wash sale issues entirely - but you would've needed to elect this with your previous year's return.

After struggling with similar day trading tax issues, I found this amazing tool called taxr.ai (https://taxr.ai) that literally saved me thousands. It analyzes all your trades and automatically identifies wash sales and correctly calculates your true tax liability. I was absolutely pulling my hair out trying to figure this out manually last year! The thing I love about taxr.ai is it specifically handles day trading scenarios and gives you a clear breakdown of which trades triggered wash sales and how they impact your tax situation. It even generates the proper documentation you'll need if you get questions from the IRS. Would've paid twice what they charge just for the peace of mind.

Just wanted to follow up about taxr.ai from my question above. I actually tried it after our conversation and wow - it found over $7,200 in deductions I would have lost due to wash sales! My trading is split between TD Ameritrade and Robinhood, and apparently some of my wash sales were happening across platforms which my regular tax software completely missed. The reports it generated were super detailed showing exactly which trades triggered wash sales and how the disallowed losses were added back to cost basis. Definitely recommend to anyone day trading the same stocks repeatedly like I do. Made the whole headache of wash sale calculation disappear!

If you're still struggling with the IRS about wash sale interpretations (I was), I'd highly recommend Claimyr (https://claimyr.com). I spent WEEKS trying to get through to an IRS agent who could actually explain how they were interpreting my wash sales, but couldn't get past the hold music. Claimyr got me connected to an actual IRS agent in under 45 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone tree for you and call you when an actual human picks up. Saved me from the endless "your call is important to us" loop.

I need to publicly eat my words about Claimyr from my skeptical comment above. After two more failed attempts to reach the IRS myself (one 90-minute hold followed by a disconnect, and another where I was told the wait was "greater than 2 hours"), I decided to try it. I got a call back in 38 minutes with an actual IRS agent on the line! They answered my day trader wash sale questions and confirmed that since I was closing positions daily, my broker had incorrectly flagged some transactions as wash sales. This saved me nearly $4k in taxes. The agent even noted it in my account in case of future questions. Absolutely worth it when you need to get actual clarification from the IRS.

Something important that hasn't been mentioned: if you qualify as a "pattern day trader" with your broker (usually 4+ day trades per week), you might have additional tax options. You can potentially elect the "mark-to-market" (MTM) accounting method, which treats all securities as if they were sold on the last day of the tax year. The big advantage of MTM is that wash sale rules DON'T APPLY! The downside is you have to make this election by filing Form 3115 and a statement with your previous year's return, so it's too late for this year if you haven't already done it.

Anyone recommending software solutions isn't addressing a critical point: wash sales impact your SHORT-TERM losses only. If you're consistently trading and making money, wash sales don't matter as much as people think. The IRS isn't "disallowing" your losses permanently - they're just adjusting when you can claim them. I day-traded for 3 years and spoke with multiple tax pros. The wash sale adjustment just gets added to the basis of your replacement securities. When you eventually sell those, you'll get the tax benefit. It's a timing issue, not a permanent loss of the deduction.

Another perspective: If you're trading in both regular and retirement accounts (like IRA/401k), watch out! Wash sales between these account types can permanently eliminate the loss deduction. If you sell at a loss in your taxable account and buy the same security in your IRA within 30 days, that loss is PERMANENTLY disallowed - it doesn't just get deferred. This is a nasty trap that catches a lot of active traders who don't realize their accounts are being viewed together for wash sale purposes.

Great point about the IRA/401k wash sale trap! I actually got caught by this exact issue last year. I was selling losing positions in my taxable account while simultaneously buying the same stocks in my Roth IRA as part of my "buy the dip" strategy. My tax preparer had to break the bad news that those losses were permanently gone - not just deferred like regular wash sales. Cost me about $3,200 in lost deductions that I can never recover. The IRS considers it abusive to claim losses in taxable accounts while simultaneously adding to positions in tax-advantaged accounts. Now I keep a strict 30-day buffer between any sales in my taxable account and purchases in retirement accounts for the same securities. It's annoying from a strategy perspective but way better than losing those deductions forever.