If you trade the same stock or similar option daily, as most traders do, the wash sale rule can add taxable income to your tax return that you didn’t really make. Wash sales can be fixed now, but not after December, and not after they are reported to the IRS.
The wash sale rule makes no sense to most people. When you receive your 1099B the tax cost basis often appears to cover up the problem. Please don’t ignore this. Be careful with AI explanations – they can be unclear or just plain wrong.
A Forbes article from 2021 discusses the possible fallout of not paying attention to the wash sale rule. A new trader made $45,000 trading in his spare time. Great! However, wash sales created a $800,000 tax bill. Don’t fall victim to wash sales. Please schedule a consultation to discuss how to avoid wash sales.
