Frequent wash sale on day trading, tax dilemma

[keschard 0]

Good day. I just wanted to ask you guys about my current dilemma. I currently day trade during weekdays and work as a Nurse on weekends. I have been going in and out of same tickers for a few months now, example is MARA and RIOT and some other tickers that I already forgot. My question is this: If i enter a position with MARA, sold it in a few seconds or minutes and incurred a loss, then waited for a good setup in the same trading day to go long again and then sell it again. If i do it that a lot in a single day with the same tickers, will those losses be ever counted since its considered a wash sale? I never hold positions overnight, except for some very rare cases. I am just concerned that my Net Profit in gains would get to be bloated because those losses stemming from the wash sale might not be included. Lets say by Dec 31st i have gained 50K dollars for the whole year by day trading. What I am afraid of is that because of the wash sale that has been happening a lot, my net gains might go higher because of the losses that cannot be used, and Im afraid that I might be slapped with a huge tax bill. I just started trading this year so this is my first time to file taxes with capital gains. If someone can me help me out and shed some light on this issue, please do so. Thank you so much guys. 

[cjsimon07 16]

Best bet is to talk to an accountant. However, my understanding of the wash sale rule is this: If you close your position and don't open a new one within 30 days there is no wash sale. Your gains are offset by your losses on each ticker. If the net of all your trades in that ticker is a negative amount then you can not trade that ticker for 30 days if you want to count the loss on your taxes. If you trade it again then you will be subject to the wash sale rules. For example let's say you've traded MARA 30 times this year. If you have $1000 in gains and $800 in losses on those 30 trades then you owe tax on $200. If you had $800 in gains and $1000 in losses you can either not trade MARA for 30 days and take the $200 loss on your taxes or continue to trade MARA and that $200 loss will not count on your 2020 taxes and be accounted for in your 2021 taxes. 

Again I am not an accountant, but I don't think there is a scenario where you would only be taxed on the gains if that's what you're asking. 

[LFS 0]

I'm also really worried about the wash sale's rule, and I've been reading a lot of articles on it but cannot understand the implication to day traders.

[1]

Let's say, I trade AAPL in 2021:

Dec, 28: buy-then-sell at loss $100

Dec, 29: buy-then-sell with win $200

Dec, 30: buy-then-sell with win $200

For 2021, will my taxable profit $400 (2x$200 wins) or $300 (2x$200 wins minus the $100 loss)?

 

[2]

Let's say another example:

Dec, 28: buy-then-sell at loss $100

Jan, 2,: buy-then-sell at win $200

I presume for 2021, I cannot claim the $100 loss, because I'm still under the wash sale rule.

Any help would be appreciated.

[3]

I'm a new trader. Last year, I day trade+swing trade in my TDAmeritrade/TOS with hundreds of ticker symbols (but not understanding tax implications), and my 2021 tax document from TD shows that my wash sale is ($15,000) and my net gain is $7500, and I need to pay capital gain tax on the $7500.   What I'm confused is why my wash sale is so high.  Does this mean that I  gained $22,500 but lost $15,000 so my net is $7500?

 

[cjsimon07 16]

I had a lot of tax issues on my 2020 1099 because of TD. Long story short, I had several long and short trades on the same ticker in the same day and TD mixed and matched buys and sells. Apparetnly that's how their "gainskeeps" works... Since they combined orders my actual gains and losses was way different than they were reporting. My 1099 was all messed up. There were other errors on their end too. I spent weeks going through it with TD until they told me it was my responsibility to record my trades and report to the irs. 

My solution: I started using TradeLog accounting software. They can properly account for multiple long and short transactions on the same ticker. It also lets you run wash sale reports to see where you stand with wash sales. And most importantly they create a form 8949 you can use for your taxes. I highly recommend this software.

Also wanted to clear up my earlier post which I think may be confusing. My understanding is if you close any position for a loss in the month of December and open a new position in that ticker within 30 days that will trigger a wash sale for that tax year. I don't think your net gain or loss on the ticker matters if you trade that ticker in that 30 day window. What I did this year using TradeLog, I checked which tickers may trigger a wash sale and the dates when that 30 day window is over. I did not trade the tickers that I had larger losses on until that 30 days was up significantly reducing my wash sales compared to last year. 

Bottom line trader taxes are complicated and your best bet is to work with an accountant who understands day trading.