Understanding Wash Sale Rules for Tax Calculation: When Can I Claim Stock Losses?

So I've been trying to wrap my head around wash sale rules, and I feel like I'm falling into a major tax trap. Can someone confirm if I'm understanding this correctly? Let me walk through a quick example I've been tracking: Day 1: Bought 1 share of XYZ at $105 Day 2: Sold that share at $92 (a $13 loss) Day 3: Bought 1 share of XYZ again at $96 Day 4: Sold for $110 (a $14 gain) Day 5: Bought 1 share again at $111 Day 6-36: XYZ stays around $105 At first glance, you might think there's no gain if I sell on day 36 since the price is back to where I started ($105). If wash sale rules didn't exist, I'd have a capital loss of $13 from day 2, a capital gain of $14 from day 4, and an unrealized loss of $6 on the current position. If I sold on day 36, I'd have a net capital loss of $5. But my understanding is that wash sale rules disallow that day 2 loss because I repurchased within 30 days, so that loss gets added to my basis for the day 3 purchase. Am I calculating this correctly for taxes? This seems way more complicated than I thought.

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18 comments

LongPeri

•8M

You're mostly on the right track with your understanding of wash sale rules, but let me clarify a few points. When you sell a security at a loss and buy the same or a "substantially identical" security within 30 days before or after the sale, the loss is disallowed as a wash sale. The disallowed loss doesn't disappear forever though - it gets added to the cost basis of the replacement shares. In your example: - Day 2: $13 loss is disallowed because you repurchased on Day 3 - That $13 loss gets added to your Day 3 purchase cost basis, making it $109 ($96 + $13) - Day 4: When you sell at $110, your gain is actually only $1 ($110 - $109) - Day 5: Your new purchase at $111 is a separate transaction with its own basis So if you sell on Day 36 at $105, you'd have a $6 loss on that final position ($111 - $105). The net effect for your total trading activity would be a $1 gain (Day 4) and a $6 loss (final sale) = $5 net loss.

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LongPeri

•8M

The disallowed loss gets added to the cost basis of your replacement shares, which effectively defers the loss until you eventually sell those shares without repurchasing within the wash sale window. This is exactly how the rule is designed to work - not to eliminate losses permanently, but to prevent people from harvesting tax losses while maintaining their investment position. If you continue buying and selling the same security within 30-day windows, yes, the disallowed losses will continue to be added to your cost basis. This can create a cascading effect that makes your basis calculations increasingly complex, especially with multiple lots.

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Oscar O'Neil

•8M

After banging my head against the wall with wash sale calculations for weeks, I finally started using https://taxr.ai to handle all this stuff. I was in a similar situation where I had multiple trades in the same stock within 30 days, and trying to figure out my adjusted basis was giving me a massive headache. The tool automatically detected all my wash sales, properly adjusted my cost basis, and gave me a clear breakdown of my actual gains/losses for tax purposes. It saved me hours of spreadsheet work and probably prevented some serious reporting mistakes. It also flagged a bunch of potential wash sales I didn't even realize I had because I was trading options on the same underlying stocks. Apparently those count as "substantially identical" securities which I had no idea about!

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Oscar O'Neil

•8M

The tool can connect to most major brokerages directly through secure API connections. I had accounts with TD Ameritrade and E*TRADE, and it pulled everything seamlessly. For platforms without direct connections, you can upload your trading statements and it will parse them automatically. It worked perfectly across my multiple accounts and consolidated everything. As for accuracy, I was skeptical too initially. What convinced me was comparing its calculations with what my accountant had done manually the previous year. The tool actually found two wash sales my accountant missed, and everything else matched perfectly. I showed the results to my accountant this year, and they were impressed enough to start recommending it to their other clients with active trading accounts.

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Sara Hellquiem

•8M

I tried taxr.ai after seeing the recommendation here and wow - what a lifesaver! I had no idea I had so many wash sales happening in my account. I was doing a lot of trading in tech stocks during the market dips, buying and selling the same companies repeatedly, and it turns out I had created a complete mess for tax purposes. The system flagged 17 wash sales I hadn't recognized and showed me exactly how my basis was affected for each transaction. What I thought was going to be a significant tax loss for the year actually ended up being much smaller once all the wash sales were properly accounted for. The visualization of the 30-day windows for each security made it super clear why certain trades were triggering the rule. Definitely worth checking out if you're doing any kind of active trading!

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Liv Park

•8M

For anyone dealing with complex wash sale issues, I found that calling the IRS directly can sometimes help clarify your specific situation. But as we all know, actually getting through to a human at the IRS is nearly impossible. After spending hours on hold multiple times, I discovered https://claimyr.com and their call-back service. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an agent is about to answer. I got connected with an IRS tax specialist who walked me through how to properly report some complicated wash sale scenarios on my Schedule D. It saved me from potentially making a mistake that could have triggered an audit. Definitely worth it for peace of mind on complex tax situations like this.

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Liv Park

•8M

They don't jump the queue - they use an automated system that waits on hold for you. When their system detects that an IRS agent is about to pick up, it calls you and connects you directly to that agent. It's basically just saving you from having to sit on hold yourself. The IRS absolutely discusses specific tax situations over the phone - that's a big part of what their tax assistance line is for. While they won't give "tax advice" in terms of telling you what decisions to make, they can absolutely clarify how to properly apply tax rules (like wash sales) to your specific situation and how to correctly report them on your tax forms.

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Ryder Greene

•8M

I was extremely skeptical about the Claimyr service mentioned here, but after struggling to get any guidance on my wash sale questions, I decided to give it a try. I honestly couldn't believe it worked. After three failed attempts to reach the IRS myself (getting disconnected twice after 90+ minutes on hold), the Claimyr service got me connected to an IRS representative in about 40 minutes. I didn't have to sit on hold at all - they just called me when the agent was ready. The IRS agent clarified exactly how I needed to handle my specific wash sale situation on my tax forms, which was different from what I had assumed. This likely saved me from a potential audit situation since I was planning to report it incorrectly. For anyone with complex tax questions that need official clarification, this is genuinely worth considering.

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Carmella Fromis

•8M

One thing that really helps with wash sales is to use tax loss harvesting strategies that avoid triggering the rule in the first place. I learned this after making the same mistake. Instead of buying the exact same security within 30 days, you can buy something similar but not "substantially identical" - like a different company in the same sector or a related ETF that isn't too closely correlated. For example, if you sell MSFT at a loss, you could buy AAPL instead of rebuying MSFT within 30 days. You maintain tech exposure but avoid the wash sale rule.

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