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Wash Sales on Schedule D (1040)

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📊 Step-by-Step Guide

Step 1: Confirm whether the loss is deductible

You cannot deduct losses from wash sales unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.

Step 2: Understand how the disallowed loss affects basis

The basis of the substantially identical property (or contract or option to acquire such property) is its cost increased by the disallowed loss (except in the case of (4) above).

Step 3: Use the Form 1099-B details (if applicable)

If you received a Form 1099-B (or substitute statement), box 5 will show any nondeductible wash sale loss if:

• The stock or securities sold were covered securities (as defined in the instructions for Form 8949, column (f), later).
• The substantially identical stock or securities you bought had the same CUSIP number as the stock or securities you sold and were bought in the same account as the stock or securities you sold.

Step 4: Don’t assume “not reported” means deductible

You cannot deduct a loss from a wash sale even if it is not reported on Form 1099-B (or substitute statement). For more details, see Pub. 550.

Step 5: Report the wash sale on Form 8949

Report a wash sale transaction on line 1 or line 3 of Form 8949 with the appropriate box checked. Then:

• Complete all columns.
• Enter “W” in column (b).
• Enter as a positive number in column (g) the amount of the loss not allowed.

See the instructions for Form 8949, columns (b) and (g), later.

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