How does the wash sale rule effect day traders in the UK? Trading equities and basic options. Say this month I have trader TSLA over 100 times, but I am close to break even as of now. Does that mean I could owe a ton of tax? Please use the above example for trading equities and options. Thank you for your time and help.
The way it's supposed to work... wash sale losses are added to the cost basis of your next trade. Therefore you should be about square on owing taxes. Supposed to be no way for you to have to pay tax on winning trades but not get to offset your losses against them. Whether or not the broker's software "gets it all correct" might be an issue. Do you have Trader Tax Status?
Yup, if you're American. I am not sure how it is in the UK, Canada has wash sales rules too, but they are not as draconian as in the US where, even if you make no profit for the year, you could STILL owe millions in tax. This has bankrupted a lot of newbie day-traders following youtube because... well, youtube is full of fakes and not even one of them talks about this very important aspect.
go ask your tax accountant. stop asking strangers on the internet for tax advice. if you can't afford a tax accountant, that mean you don't have enough money to even trade or worry about wash sale.
A lot of people who even THINK they know, still don't KNOW what they don't KNOW about wash sales, etc. Every once in a while I'll jot a note of another tid-bit I find to help me avoid the tax-man. e.g. "- if you are holding a stock and the position is declining, you may want to protect your downside by adding a synthetic short to the position until conditions reverse. Notice that by adding a long put and short call to a long stock position, you establish a position known as a long collar. Just a word of caution: if you create a short position using options with the same strikes against a long stock position, the transaction may be refused because of a rule known as "shorting the box." Basically, the trade is interpreted as tax avoidance by Revenue Canada. To avoid this scenario, you can separate the strikes to create the collar."
i did. I told him to go ask a tax accountant. No one should listen to any tax advice to anyone on the internet. Now you are added to my shit list. Bye biotch!
Thank you for that, so I need to check how it effects UK traders, that trade US stocks of course. On a side note, how do day traders in the US who trade anything from 10-100 times per day the same stock, get around this rule? I don't see how they can make money, if tax screws them when they trade the same stock so many times over a short period of time. Thank you again
there is a way around this for trader in USA to get around the wash sale rule. Day trade in your traditional and Roth IRA.
You are right to be confused. And the answer to that is less than 1% of day-traders actually make money. Now you see one of the many reasons why.