New Day Trader, I only trade one stock. Very confused. In & out for 3 hours. Last trade of the day I noticed that I purchased at $800 and my cost according to my broker was $810.00234 the extra was due to my wash /sale. What am I missing here? Is this good/bad doesn’t even matter, is this rule exempt for day traders? I understand this is meant to prevent people from selling their stock December 31 at a loss and then buying it right back at the same price January 1... but I don’t see how it even matters because we should only be taxed on our profits? Maybe I’m missing something.
If you have a loss that you can't take because of wash sale rules.... the loss is added to the cost basis of your next trade... effectively allowing you to make up the loss on the original trade, tax free. Personally, my view is that the wash sale thingy should be scrapped. It's really just unnecessary accounting with no overall financial/tax impact (except in rare cases), and it's easy to avoid.
I don't think it's a good thing, but yes... you can make up the $10 tax free. And if you end up taking a loss on this trade... say $50 and you bought the stock again within 30 days and again for $800, your "cost basis" on that trade would be $860... allowing you to make up the $60 tax free. Now let's say you sell that second trade at a loss for $750 and you do not buy the same stock back withing 30 days so that the wash sale rules no longer apply to this trade..... You bought it the 2nd time for $800 and sold it for $750. That looks like a $50 loss you can put in your loss column to offset against gains, right? Well not exactly. You see your cost basis was $810 from the 1st trade where the wash sale rules wouldn't allow you to use the $10 loss to offset gains.... so your loss for tax purposes on this trade is not $50 but rather $60. See... isn't that fun?
Makes for a lot of messy/busy-work accounting and record keeping... and has virtually zero tax/financial impact on anybody. Wouldn't it be less complicated if you could have just listed your first trade at a $10 loss and your second trade at a $50 loss... instead of keeping track and adjusting the cost basis based upon the calendar? And what about when you get to the end of the year and have a loss... but you buy it back within 30 days but it's into the next year when you do? File an amended return to disallow the loss last year so that you can increase your cost basis in the trade this year? What hassle and waste of time. (Maybe a waste of money too if you end up having to pay an accountant to sort it all out for you.) I presume broker software does a good job of keeping track of all this for customers... (?)