Wash Sale Loss Disallowed - Carry Over

Forum|Forum|3 years ago
February 13, 2023
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I had substantial disallowed wash sales on long term and short term earnings last year. Since the wash sales are not allowed this year, do they carry over into next year on the securities? Or are wash sales for the year wiped out going into next? Trying to understand the process.

TurboTax Self Employed Online

ThomasM125

A wash sale occurs when you sell a security at a loss, then purchase it or something similar back again during the 60 day wash period (30 before and 30 after the sale). When this happens, the loss deduction on that sale is dissallowed permanently, it is not carried over to future periods. You can only recognize the loss when you sell the security aquired in the wash sale later on and don't re-invest the proceeds back by purchaseing the same or similar security within the 60 day wash period.

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vrobertAuthor

Is this accurate though:

If a wash sale is left on then that loss cannot be included in taxes for that year, but it will be added to losses in the next year when the trade is closed for a profit or if a loss another not opened for 30+ days.

GeorgeM777

No, it's somewhat misleading. The disallowed loss is not added to losses in the following year. What happens with a wash sale as @ThomasM125 explained, is that while the loss is disallowed it also becomes permanently suspended. Should the taxpayer, or investor, re-purchase the same security, then that previously disallowed loss is added to the cost basis. Thereafter, if the taxpayer/investor should sell the security, and incur a loss, that loss will be realized provided the taxpayer/investor does not again repurchase the same or similar security within 30 days of the sale.

Additionally, that 30-day window referenced in the previous paragraph includes the period of time before the sale as well. So that the prohibitive period covers a total of 61 days, that is, 30 days before the re-purchase and 30 days after the sale.

@vrobert

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