PA state taxes 1099-B cost basis (Wash Sale)

[Nicki9]

I filled my Federal form with Disallowed Wash Sale. Now doing my PA State, it is asking if I need to adjust my cost basis for each stock. The ones it is asking are generally the one where I paid more than sold for, so I lost money on them (some are a wash sale, some are not). Do I need to adjust the cost basis? If so, what am I putting in the cost basis? The same price as bought so it shows no loss?

[DianeW777]

Here is the reason: You can adjust the cost basis to what it actually is on your Pennsylvania (PA) return.  PA, unlike the federal return, does not allow any carryforward losses.  They also do not acknowledge wash sales.  A loss in one category of income such as investments is not allowed to offset any other category of income such as wages.

If  you have an overall gain and the wash sale losses would contribute to reducing your PA taxable income you should make sure you get the basis and loss included for your PA tax return.

[Nicki9]

So "Wash Sale disallowed" which I did on Federal does not count for PA State. Meaning I receive the loss which will help to bring down the Gains.  Is this correct?

[DianeW777]

Yes, it will help to bring down the gain on your Pennsylvania (PA) income. The issue for you is that you must track cost basis for the wash sale for federal purposes only which will cause an adjustment on the PA return when you use the cost basis on your federal return in the future. In other words you have already used it up on the PA return.  It will not be difficult as long as you put a note with your current return to remind you next year.

@Nicki9