Pennsylvania (PA) does not follow the federal rule for wash sales. Each year all sales of investments are combined for the overall gain or loss (netted) for PA purposes. There is no tracking of wash sales for your PA state return. PA does not allow any loss from one category of income to offset another category of income.
Wash Sales
The federal wash sale provisions do not apply for Pennsylvania personal income tax purposes. For Pennsylvania purposes, every transaction is considered separate and independent of any subsequent transaction.
That being said, only you will know the extent of your wash sale losses in total and if each one applies at year end. I'm not convinced the broker knows when it is no longer wash sale. Below you will find a summary of the wash sale rules as they pertain to your federal return.
Wash sales cannot be combined into section totals. They should be entered individually so that you can track your cost basis and know when you are allowed to use the information on a final sale.
Wash Sale Rule Defined:
- A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
- It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
- The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.
Affect on Cost Basis:
- The loss that occurs on a wash sale is added to the cost basis of the shares purchased that created the wash sale.
- When all shares are sold and there is no repurchase, that increased cost basis will be used in full and used to determine gain or loss.
Be sure to keep good records so that you know when to add those losses for future sales.
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