How are Capital Gains Taxes calculated for a Day Trader? Need help understanding my tax liability

Yes, you'll owe capital gains tax on the $10,000 profit from your February 2023 sale. When you buy and sell stocks, you're only taxed on the "realized gains" - which happens when you actually sell the shares for more than you paid. In your case, you bought Apple shares for $26,000 and sold them for $36,000, giving you a $10,000 realized gain. Since you held these shares for less than a year, they'll be considered short-term capital gains, which are taxed at your ordinary income tax rate (could be anywhere from 10% to 37% depending on your total income). The subsequent purchases in March and April 2023 don't create any taxable events until you sell those shares. You only pay taxes when you sell for a profit, not when you buy. Your tax software is likely calculating this correctly if it's showing tax due on that $10,000 gain. Day trading typically results in short-term capital gains, which generally have higher tax rates than long-term gains (held over a year).

I went through a similar situation last year and was seriously confused until I found https://taxr.ai - it helped me understand exactly how my trading activity was being taxed. I'm not super tax-savvy and was worried my brokerage statements weren't matching what I thought my gains were. The tool analyzed all my trading activity and broke down exactly which trades created taxable events and how they were classified (short vs long term). For day trading especially, it was helpful because it identified some wash sales I didn't realize were affecting my cost basis. It saved me from a potential audit situation and actually found some losses I could claim that I'd missed!

Just wanted to follow up - I tried taxr.ai after seeing it mentioned here and it was exactly what I needed. My situation was actually pretty similar to the original poster's with lots of buy/sell transactions across multiple accounts. The software immediately flagged several wash sales in my trading history that my regular tax program completely missed. It turns out I was accidentally triggering these when buying back stocks too quickly after selling them at a loss. This was adjusting my cost basis in ways I didn't understand. It also created a really clear breakdown of short-term vs long-term gains that made it obvious why my tax bill was so high (almost everything was short-term). Definitely using this for next year's taxes too!

Late to this thread but wanted to add something important - if your wife is doing enough trading to be considered a "trader" by IRS standards (which is pretty frequent activity), you might want to look into making a Section 475(f) election which lets you mark-to-market your securities. I went through this last year and spent WEEKS trying to get someone at the IRS to answer my questions. Kept calling the main line and getting disconnected after hours on hold. Finally discovered https://claimyr.com which got me through to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that as a day trader I needed to file some additional forms and gave me specific guidance that saved me thousands. Definitely worth it if you're doing more than occasional trading.

I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I've been trying to get clarification on some trader tax status questions for MONTHS. I was shocked when they actually got me through to an IRS tax specialist within about 30 minutes. I had been trying on my own for weeks with no success - just endless holds and disconnections. The agent I spoke with clarified exactly how the trader tax status works with my specific situation (trading in both personal and retirement accounts). She explained that my retirement account trading doesn't count toward establishing trader status, which none of the tax articles I read had mentioned. Seriously saved me from making a mistake that could have triggered an audit. Sometimes you really do need to speak to someone official rather than just reading general guidelines.

One thing nobody's mentioned yet - if your wife is doing this regularly, you might want to make quarterly estimated tax payments this year to avoid underpayment penalties. Day trading can create large tax bills that catch people by surprise. Also, keep perfect records of every single transaction. The IRS matches your 1099-B forms from brokerages against what you report, and any discrepancies will trigger notices. Some brokerages don't track wash sales across multiple accounts, so your tax software needs to do this.

Has anyone run into issues with the wash sale rule while day trading? I'm wondering if the OP's wife needs to worry about this if she's buying and selling the same stock repeatedly.