A wash sale occurs when you sell a security at a loss and buy the same or a "substantially identical" security within 30 days before or after the sale. The IRS prohibits tax deductions on these losses, affecting your investment's cost basis. Understanding wash sales helps you make tax-efficient investment decisions and avoid unexpected tax consequences in your M1 account.
Cross-account impact of Wash Sales
Wash sale rules apply across all your accounts, including:
Different brokerage accounts
IRA accounts (traditional and Roth)
Spouse's accounts (if filing jointly)
How M1 handles Wash Sales
M1's system automatically identifies potential wash sales in your account
Adjusts cost basis accordingly in tax reporting
Displays adjusted basis in your account transaction history
Provides wash sale information on your year-end 1099-B tax form
Note: M1 cannot detect wash sales across different financial institutions
Avoiding unintended Wash Sales
Wait at least 31 days before repurchasing a security sold at a loss
Consider purchasing similar but not "substantially identical" securities
Be mindful of dividend reinvestments that might trigger wash sales
Example – Wash Sale
You sell 10 shares of XYZ Company at a $500 loss on March 15. If you purchase any XYZ shares between February 13 and April 14, the $500 loss becomes a wash sale. Instead of deducting the loss, it gets added to the cost basis of your new XYZ shares, effectively deferring (not eliminating) the tax benefit until you eventually sell those shares without triggering another wash sale.
Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.
All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary. Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.
This content was generated using artificial intelligence and is intended for informational and educational purposes only. While reasonable efforts are made to ensure accuracy, AI-generated outputs may omit key context; and should not be construed as financial, investment, legal, or tax advice. Users should independently verify all information and consult a qualified professional before making any financial decisions.
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