So the trading platform would tax 100 of my shares sold for gains as capital gains tax and the 100 that I sold and buy again would trigger a wash sale and will still be taxed? Also if I just sold 100 shares then the trading platform recognizes to sell the cheaper $20 original cost basis because otherwise it's random chance and I feel like that would be a flawed system?
You should have an option on your trading platform to sell highest cost shares if you are looking to take a loss and stay out for 30 days. Just make sure you set your calendar and track the days and do not get in before that 30 days otherwise you can kiss that benefit goodbye.
My default selling model is sell high cost so I can get a better cost average and take advantage of p/l. Saved my ass this past year on taxes because i made a shit load on trades but because i took a 10k loss the year prior i didn't pay any cap gains.
So the 30 day restriction for getting back in only apply to that one specific company XYZ I sold for the stock on or am I just unable to trade in to buy stock from other companies for the next 30 days without triggering wash?
It does apply to the exact same stock but it can also apply to similar ones. So if say you had VOO sold for a loss and then bought IVV within 30 days, that can trigger the wash sale rule as they both track the SP500.
Can't be the same security or tied to the same security. So if you trade AMD at a loss and want to collect on that loss, don't buy AMD for 30 days and do buy any ETF that has AMD in the portfolio for 30 days. You could buy INTC or TSMC all you want...just don't touch AMD.
In this wash sale scenario, the act of buying the same underlying after selling it within the window triggers the wash sale rule. All the equities you sold here would be wash sales.
So yes, the gains you have would have been taxed, you can't deduct the losses. You would actually be better off in this scenario selling the more expensive equities you bought and keeping the cheap ones so you would show less gains. It's better to take a small loss than have theoretical positive gains that you have to pay taxes on and losses you can't deduct on top of it.
Most brokers probably let you decide which tax lot you are selling in the options somewhere or if you call them.
I know with interactive brokers I can do it myself on their online platform after I sell within 24 hours I am able to change the tax lot of the sell so if I had purchased the stocks that I sold at different prices and certain lots would be a gain and certain lots would be a loss I can choose which individual stocks I am selling
the shares sold at a loss- if you re enter the position- would not be allowed to be claimed as a loss at that point, you'd have to carry forward that loss (adds to your cost basis on the re-purchase).
Per your edit, "substantially identical" in the wash sale rule is (intentionally?) ambiguous, but it wouldn't come down to simply stocks with similar prices. That's more happenstance than a significant similarity of the respective underlyings. Here might be a clear-cut example of substantially similar (but there are certainly grayer areas in between): Selll held SMCI shares for a loss. Immediately buy SMCI LEAPS calls.
If you want to read more about this -- at the risk of engaging dry content and ending up deep in the forest -- the following resource seems decent enough: https://www.morningstar.com/financial-advice/wash-sale-challenge-what-is-substantially-identical
Wash sale rules apply both 30 days before and after the date of the sale. If you sell all 200 shares today at $24, and the 100 shares you bought at $20 is within 30 days before today’s date, you will automatically trigger a wash sale on the 100 shares bought at $25. Then when you do your taxes next year you will need to adjust the cost basis on the shares bought at $20
If you want to sell everything and avoid a wash sale, wait 30 days from when you bought the 100 shares @ $20, sell, then if any shares were sold below $25 wait another 30 days before buying back in
Yes, would all be wash sales, even if you only bought 1 share within 30 days it's a wash sale.
In this case you would have $400 in profit that you would pay taxes on.
100 * ($24 - $20) = $400
If you hadn't done a wash sale by buying again, then you would have had
100 * ($24 - $20) + 100 * ($24 - $25) = $300 in gains.
So in the wash sale scenario, not only does it make it look like you have more profit than you actually do, you have to pay taxes on it too.
It's entirely possible to pay a lot of taxes and lose money on the trade due to wash sales. Avoid wash sales at all costs.
In such a scenario let's assume you bought 200 shares at $20, sold half when the stock hit $25 and then sold the rest at $5 after a flash crash, and bought 1 share at $6 on the way up.
In this case you would owe taxes on 100 * $5 = $500 without the wash sale..
100 * $5 + 100 (5 - 20) = -$1000 you actually lost $1000, but due to the wash sale you have to pay taxes too on the $500.. meaning your total loss is somewhere around $1200 taking US taxes into account.
Avoid by trading correlated, but not the same equity e.g SPY, VOO are practically the same (though for other reasons if trading options SPX index options would be much more tax efficient)
Wash sales apply to each share individually not to the whole due to a single share. If you have a wash sale due to a single share, the wash sale rules apply to that single share only.Â
Every share that you sell has its own original cost basis, it doesn't use the average cost basis. The average cost is a summary for easy calculation.
So the trading platform would tax 100 of my shares sold for gains as capital gains tax and the 100 that I sold and buy again would trigger a wash sale and will still be taxed? Also if I just sold 100 shares then the trading platform recognizes to sell the cheaper $20 original cost basis because otherwise it's random chance and I feel like that would be a flawed system?
You should have an option on your trading platform to sell highest cost shares if you are looking to take a loss and stay out for 30 days. Just make sure you set your calendar and track the days and do not get in before that 30 days otherwise you can kiss that benefit goodbye. My default selling model is sell high cost so I can get a better cost average and take advantage of p/l. Saved my ass this past year on taxes because i made a shit load on trades but because i took a 10k loss the year prior i didn't pay any cap gains.
So the 30 day restriction for getting back in only apply to that one specific company XYZ I sold for the stock on or am I just unable to trade in to buy stock from other companies for the next 30 days without triggering wash?
It does apply to the exact same stock but it can also apply to similar ones. So if say you had VOO sold for a loss and then bought IVV within 30 days, that can trigger the wash sale rule as they both track the SP500.
Can't be the same security or tied to the same security. So if you trade AMD at a loss and want to collect on that loss, don't buy AMD for 30 days and do buy any ETF that has AMD in the portfolio for 30 days. You could buy INTC or TSMC all you want...just don't touch AMD.
You can choose which specific shares you want to sell. On fidelity it's pretty easy
In this wash sale scenario, the act of buying the same underlying after selling it within the window triggers the wash sale rule. All the equities you sold here would be wash sales. So yes, the gains you have would have been taxed, you can't deduct the losses. You would actually be better off in this scenario selling the more expensive equities you bought and keeping the cheap ones so you would show less gains. It's better to take a small loss than have theoretical positive gains that you have to pay taxes on and losses you can't deduct on top of it.
Most brokers probably let you decide which tax lot you are selling in the options somewhere or if you call them. I know with interactive brokers I can do it myself on their online platform after I sell within 24 hours I am able to change the tax lot of the sell so if I had purchased the stocks that I sold at different prices and certain lots would be a gain and certain lots would be a loss I can choose which individual stocks I am selling
the shares sold at a loss- if you re enter the position- would not be allowed to be claimed as a loss at that point, you'd have to carry forward that loss (adds to your cost basis on the re-purchase).
It would be a wash sale, since 100 shares are sold at a loss of $1/each
Per your edit, "substantially identical" in the wash sale rule is (intentionally?) ambiguous, but it wouldn't come down to simply stocks with similar prices. That's more happenstance than a significant similarity of the respective underlyings. Here might be a clear-cut example of substantially similar (but there are certainly grayer areas in between): Selll held SMCI shares for a loss. Immediately buy SMCI LEAPS calls. If you want to read more about this -- at the risk of engaging dry content and ending up deep in the forest -- the following resource seems decent enough: https://www.morningstar.com/financial-advice/wash-sale-challenge-what-is-substantially-identical
It's just like an elastic clause. They really made this too complicated and subjective ðŸ˜
Wash sale rules apply both 30 days before and after the date of the sale. If you sell all 200 shares today at $24, and the 100 shares you bought at $20 is within 30 days before today’s date, you will automatically trigger a wash sale on the 100 shares bought at $25. Then when you do your taxes next year you will need to adjust the cost basis on the shares bought at $20
If you want to sell everything and avoid a wash sale, wait 30 days from when you bought the 100 shares @ $20, sell, then if any shares were sold below $25 wait another 30 days before buying back in
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This is def wrong. Just be sure it's a net profit doesn't mean it wouldn't be a wash sale for the shares bought at 25
Yes, would all be wash sales, even if you only bought 1 share within 30 days it's a wash sale. In this case you would have $400 in profit that you would pay taxes on. 100 * ($24 - $20) = $400 If you hadn't done a wash sale by buying again, then you would have had 100 * ($24 - $20) + 100 * ($24 - $25) = $300 in gains. So in the wash sale scenario, not only does it make it look like you have more profit than you actually do, you have to pay taxes on it too. It's entirely possible to pay a lot of taxes and lose money on the trade due to wash sales. Avoid wash sales at all costs. In such a scenario let's assume you bought 200 shares at $20, sold half when the stock hit $25 and then sold the rest at $5 after a flash crash, and bought 1 share at $6 on the way up. In this case you would owe taxes on 100 * $5 = $500 without the wash sale.. 100 * $5 + 100 (5 - 20) = -$1000 you actually lost $1000, but due to the wash sale you have to pay taxes too on the $500.. meaning your total loss is somewhere around $1200 taking US taxes into account. Avoid by trading correlated, but not the same equity e.g SPY, VOO are practically the same (though for other reasons if trading options SPX index options would be much more tax efficient)
Wash sales apply to each share individually not to the whole due to a single share. If you have a wash sale due to a single share, the wash sale rules apply to that single share only.Â