Understanding Wash Sales on Your 1099-B

The "Wash Sale Loss Disallowed" column on your 1099-B confuses a lot of investors. Here's what it means and why it matters.

The Wash Sale Rule in 30 Seconds

If you sell a security at a loss and buy a substantially identical security within 30 days before or after the sale, the IRS disallows the loss deduction. That disallowed amount is the "wash sale loss" on your 1099-B.

The disallowed loss isn't gone forever — it gets added to the cost basis of the replacement shares. But for the current tax year, you can't deduct it.

How It Appears on Your 1099-B

Your broker reports wash sales in a dedicated column, usually labeled:

• "Wash Sale Loss Disallowed" (Schwab, Fidelity)
• "Wash Sale Adj" (TD Ameritrade)
• "W" column with a dollar amount (various brokers)

For example:

Security	Proceeds	Cost Basis	Gain/Loss	Wash Sale
AAPL	$5,000	$5,500	-$500	$500

This means you sold AAPL at a $500 loss, but the entire loss is disallowed because you bought AAPL again within the 30-day window.

Common Wash Sale Scenarios

Active traders trigger wash sales constantly. If you buy and sell the same stock multiple times in a month, almost every losing trade could be a wash sale.

Dividend reinvestment (DRIP) is a sneaky trigger. If you sell a stock at a loss but your DRIP bought shares within 30 days, that's a wash sale.

ETFs and mutual funds can trigger wash sales too, if the IRS considers them "substantially identical." Selling an S&P 500 ETF at a loss and buying a different S&P 500 ETF could be challenged.

Why Accuracy Matters

If you don't report wash sales correctly:

• You could over-deduct losses, leading to an IRS notice and penalties
• Your cost basis on replacement shares will be wrong, causing problems when you eventually sell them
• You might miss legitimate losses that aren't actually wash sales

How 1099-B Converter Handles Wash Sales

When you upload your 1099-B PDF, our extraction specifically looks for wash sale amounts. They're included in:

• The CSV as a dedicated column
• The TXF file as an adjustment line
• The Excel file with clear labeling

This means your tax software gets the correct wash sale data automatically — no manual adjustments needed.

FAQ

What is the wash sale rule?

The wash sale rule (IRC §1091) disallows a capital loss if you buy a substantially identical security within 30 days before or after selling at a loss. The disallowed loss isn't gone — it's added to the cost basis of the replacement shares and deferred until you sell those.

How do wash sales appear on my 1099-B?

Your broker reports the disallowed amount in a dedicated "wash sale loss disallowed" box on the 1099-B, and flags the affected transactions. That amount has to carry through to your Form 8949 as a column (g) adjustment.

What code marks a wash sale on Form 8949?

Code W. It goes in column (f), with the disallowed loss as a positive number in column (g). See the full Form 8949 adjustment codes reference for how W interacts with the other codes.

Does dividend reinvestment trigger wash sales?

Yes, and it's one of the sneakiest triggers. If you sell a stock at a loss but your DRIP automatically bought shares within the 30-day window, that purchase creates a wash sale even though you didn't manually place the trade.

Do wash sales apply to crypto?

Historically the wash sale rule targets "stocks and securities," and crypto has sat in a gray area — but rules are tightening. Check current-year guidance, and if you trade both, keep the equity and crypto reporting separate.

What if I sold all my shares — is it still a wash sale?

It can be, if you repurchased within the window before year-end. But a full exit with no replacement inside 30 days generally releases the disallowed loss — see wash sale when you sold all shares for the specifics.

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Worried your wash sales won't carry through cleanly? Try it on your 1099-B — wash sale amounts are preserved in every export format, so your tax software gets them automatically.