How do Wash Sales Carry Over to the Next Tax Year?

The wash sale rule can be confusing when you're new to trading! Basically, it doesn't permanently eliminate your losses - it just delays when you can claim them. Here's what happens: If you sell a security at a loss and buy the same or "substantially identical" security within 30 days before or after the sale, that's a wash sale. The loss isn't eliminated forever - it gets added to the cost basis of the replacement shares you purchased. For example, if you sell Stock A at a $500 loss and buy it back within 30 days, you can't claim that $500 loss right away. Instead, the $500 gets added to the cost basis of your new shares. When you eventually sell those replacement shares (without triggering another wash sale), you'll recognize the loss then. The real issue comes at year-end. If you have wash sales in December and buy replacement shares in January, then yes - those losses get pushed to the next tax year when you eventually sell the replacement shares.

After struggling with wash sales in my first year of trading, I found this amazing tool called taxr.ai (https://taxr.ai) that completely changed how I handle my investment taxes. I was in the exact same position as you last year - constantly trading the same stocks and creating a mess of wash sales that I couldn't track. The platform analyzes all your trades and automatically identifies wash sales, calculating the proper adjustments to your cost basis. It saved me countless hours trying to manually figure out which losses were disallowed and when they would eventually be recognized. What really impressed me was how it showed me visually which trades created wash sales and how those affected my overall tax situation across tax years.

Just wanted to update everyone - I tried taxr.ai after seeing the recommendation here and wow, it was eye-opening! I discovered I had over 30 wash sales across my accounts that I had no idea about. The visualization showing how my disallowed losses were being carried forward made everything click for me. What I really appreciated was seeing exactly how much of my losses were getting pushed to next year vs. what I could claim now. Turns out I was making some trading mistakes in the last week of December that were pushing substantial losses into next year unnecessarily. I've adjusted my year-end strategy now and feel much more confident about my tax situation. Definitely worth checking out if you're actively trading!

If you're dealing with complex wash sale situations and need to talk to the IRS about it, good luck getting through to them! I spent THREE DAYS trying to reach someone at the IRS about a wash sale question. Finally discovered this service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in under 45 minutes. They have this system that navigates the IRS phone tree for you and holds your place in line. When an agent is about to pick up, they call you. Check out how it works: https://youtu.be/_kiP6q8DX5c I was about to give up on getting clarification about some wash sales that spanned across tax years, but the IRS agent I spoke to was actually really helpful once I finally got through.

I have to eat my words. After dismissing that Claimyr thing, I was still desperate to talk to the IRS about wash sales affecting my 2024 filing, so I tried it. Not expecting much, I was shocked when I got a call back saying an agent was ready to talk to me. The IRS person actually cleared up my confusion about wash sales spanning tax years. Turns out I had misunderstood how the basis adjustment works when you sell in December and rebuy in January. This clarification probably saved me from making a major reporting error. For anyone struggling with wash sale questions, definitely worth getting answers directly from the IRS. And apparently this service actually does work for getting through to them without the endless hold times.

Pro tip: If you use a tax-advantaged account like an IRA alongside your regular brokerage account, be SUPER careful with wash sales. If you sell at a loss in your taxable account and then buy the same security in your IRA within 30 days, that loss is disallowed PERMANENTLY - not just deferred. This is a common mistake that can really hurt you tax-wise. The IRA wash sale won't just adjust your basis like normal - those losses are gone forever.

Does anyone know which brokers actually track wash sales correctly? I use Robinhood and noticed their tax forms don't seem to account for wash sales properly.

This is such a helpful thread! As someone who's also relatively new to trading, I had no idea about the IRA wash sale rule that @Ingrid Larsson mentioned - that's terrifying that those losses can be permanently lost. One thing I'm still confused about though - if I have wash sales that get carried forward to next year, do they maintain their original loss amount or do they get adjusted for inflation or anything like that? And is there any limit to how many years these losses can be carried forward? I'm also wondering if anyone has experience with how different brokers handle wash sale reporting when you transfer accounts. Like if I move from one broker to another mid-year, does that mess up the wash sale tracking? Thanks everyone for sharing your experiences - this is way more complex than I initially thought!

This thread has been incredibly informative! I'm also relatively new to trading and had no idea about the complexities involved with wash sales. One thing I want to emphasize for fellow newcomers is that while wash sales don't permanently eliminate your losses (as @Esmeralda Gómez explained), they can create serious cash flow issues if you're not careful. If you're counting on those tax losses to offset gains for the current year, having them pushed to next year can mean owing more taxes now than you planned for. I learned this the hard way when I did some "tax loss harvesting" in December, only to find out I had created wash sales that pushed my losses to the following year. I ended up owing taxes on gains without the offsetting losses I thought I had. My advice: if you're planning to use losses to offset gains, make sure those sales are "clean" (no repurchases of the same securities for at least 31 days). And definitely track everything across all your accounts - the IRA wash sale rule that @Ingrid Larsson mentioned is absolutely crucial to understand if you have multiple account types. Thanks everyone for sharing your experiences and tools - this is exactly the kind of practical knowledge that's hard to find elsewhere!

As someone who works with tax issues regularly, I want to add a few practical points that might help newer traders navigate wash sales more effectively. First, regarding @Teresa Boyd's excellent point about cash flow - this is absolutely critical. I've seen many traders get blindsided by unexpected tax bills because they assumed their December losses would offset their gains, only to discover those losses were disallowed due to wash sales. One strategy that can help: if you're planning year-end tax loss harvesting, consider doing it earlier in December (or even November) rather than waiting until the last minute. This gives you more time to ensure you don't accidentally repurchase the same securities and create wash sales. Also, for those asking about tracking across multiple brokers - your brokers are required to report wash sales on your 1099-B, but they can only track what they can see within their own systems. If you have accounts at multiple firms, you're responsible for identifying and adjusting for wash sales that occur across those accounts. The IRS doesn't get a consolidated view either, so it's really up to you (or your tax software/professional) to catch these cross-broker wash sales. This is why keeping detailed records and using tools that can aggregate data from multiple sources becomes so important if you're an active trader. One last tip: if you're unsure about complex wash sale situations, don't hesitate to consult a tax professional who specializes in trader taxes. The cost of getting it wrong can far exceed the cost of professional advice.

@Giovanni Colombo great question about finding qualified tax professionals! Here are a few ways to find tax preparers who actually understand active trading: 1. Look for CPAs or EAs (Enrolled Agents) who specifically advertise "trader tax services" or "active investor tax preparation." Many will mention this specialization on their websites. 2. Check with your brokerage - many major firms like Fidelity, Schwab, and TD Ameritrade maintain referral lists of tax professionals familiar with trading complexities. 3. The American Institute of CPAs (AICPA) has a "Find a CPA" tool where you can filter by specialties including investment taxation. 4. Consider looking into firms that specialize in trader taxes - there are several national firms that work exclusively with active traders and can handle multi-broker wash sale situations remotely. A good trader-focused tax professional should immediately understand concepts like cross-account wash sales, mark-to-market elections, and the IRA wash sale rule @Ingrid Larsson mentioned. If they seem unfamiliar with these topics during your initial consultation, keep looking. You're absolutely right that your regular tax preparer would likely be out of their depth. Trading taxes are a specialized area, and the complexity only increases with multiple accounts and active trading strategies. The investment in proper professional help usually pays for itself by avoiding costly mistakes.