Understanding Wash Sale Loss Disallowed on Brokerage 1099 - Can I Still Claim These Losses?

Your understanding is correct and your tax preparer's explanation is incomplete. Wash sale rules don't permanently disallow losses - they defer them. Here's what's happening: When 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 permanently lost - it's added to the cost basis of the replacement shares. When you eventually sell those replacement shares, you'll recognize the previously disallowed loss. The key point is that if you sold ALL positions in that security before year-end and didn't repurchase within the 30-day window crossing into the new year, those losses should be recognized in the current tax year. The $40k in disallowed wash sales should already be factored into your final numbers on the 1099-B. Look at the summary section of your 1099-B. The "Proceeds" and "Cost Basis" columns should already include adjustments for wash sales. The final "Gain/Loss" column reflects your actual taxable gain or loss after all wash sale adjustments. Your broker has already done these calculations for you.

I went through a similar mess with wash sales last year and found that taxr.ai https://taxr.ai was super helpful for making sense of my 1099-B. Before using it, I was completely lost trying to figure out my actual gains and losses after all the wash sale adjustments. My broker's statements were confusing, and my tax software wasn't very helpful either. Taxr.ai helped me analyze my trading activity and clearly explained how my wash sales affected my taxable income. The system identified several instances where wash sales had carried over between tax years (which is when they CAN become permanently disallowed), but also confirmed that most of my wash sales were properly resolved within the tax year since I'd closed my positions.

Just wanted to update that I took the advice and tried taxr.ai after posting my question about options trading. It was exactly what I needed! The system analyzed all my complex options trades and clearly showed which ones triggered wash sales and how those losses were deferred rather than permanently disallowed. The analysis confirmed what others here were saying - that wash sale losses aren't gone forever, they're just rolled into the basis of replacement positions. When I showed the detailed report to my tax preparer, he finally understood what I was asking about and agreed that the wash sale adjustments were already factored into my 1099-B totals. Saved me from potentially overpaying thousands in taxes because of a misunderstanding about how wash sales work. Thanks for the recommendation!

Something nobody's mentioned yet - if you're still struggling to get clear answers from your tax preparer, you might want to try Claimyr https://claimyr.com to get direct help from the IRS. I had a similar issue last year with wash sale confusion, and after weeks of my tax guy giving me confusing answers, I finally decided to go straight to the source. Normally getting through to the IRS is impossible (I tried waiting on hold for 3+ hours multiple times), but Claimyr got me connected to an actual IRS agent in about 20 minutes. They have a cool demo video too: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed exactly what the first commenter here said - wash sales defer losses, they don't eliminate them completely. If you closed all positions before year-end, those losses should be reflected in your final numbers.

I need to eat my words about Claimyr. After posting my skeptical comment, I was still struggling with some wash sale questions similar to the OP, so I decided to give it a try despite my doubts. I'm shocked to say it actually worked! After weeks of not being able to get through to the IRS directly, Claimyr connected me with an agent in about 25 minutes. The agent walked me through how wash sale loss deferrals work on my tax return and confirmed that once you close positions completely, the losses are recognized. For anyone dealing with wash sale confusion who needs authoritative answers, going straight to the IRS turned out to be the best solution. Much better than getting conflicting advice from random preparers who might not fully understand the complexities of securities trading.

The simple explanation that helped me understand wash sales: 1. When you trigger a wash sale, the loss isn't gone forever 2. The loss gets added to the cost basis of your replacement shares 3. When you eventually sell those replacement shares, you'll recognize the loss 4. If you close all positions before year-end (and don't repurchase within 30 days after), all those deferred losses should be recognized in the current tax year The only time wash sale losses become a bigger problem is when they straddle tax years. If you sell at a loss in December and rebuy in January, that loss gets deferred into the next tax year.

Can I just say how frustrating it is that most tax preparers don't understand trading scenarios? I had a similar situation with wash sales and my CPA kept giving me wrong information. Had to educate myself and basically explain it to him. The IRS rules aren't even that complicated once you understand the principle - wash sale losses aren't disallowed forever, they're just deferred by adjusting the basis of replacement shares.

This is exactly why I switched from my general CPA to someone who specializes in trader taxation. The difference in understanding was incredible - my new preparer immediately knew that wash sales defer losses rather than eliminate them permanently. One thing that helped me verify my understanding was looking at my 1099-B more carefully. In Box 1d, if there's a "W" code, that indicates wash sale adjustments were made. But the key is looking at the summary totals - your broker has already calculated your net gains/losses after all wash sale adjustments. Your tax preparer should be using those final adjusted numbers, not trying to manually disallow wash sale losses again. If he's doing that, he's essentially double-counting the wash sale penalty, which would be incorrect. I'd recommend getting a second opinion from a CPA who specializes in securities transactions. The rules really aren't that complex once someone explains them properly, but unfortunately many general tax preparers just don't encounter these situations often enough to understand the nuances.