Tax Domain Harvest

Data Schema

Add under domains.harvest in data/tax-profile.json:

{
  "domains": {
    "harvest": {
      "hasWashSales": true,
      "priorYearCarryforward": {
        "shortTerm": 0,
        "longTerm": 2400
      },
      "washSaleLots": [
        {
          "security": "TSLA",
          "cusip": "88160R101",
          "saleDate": "2025-08-15",
          "saleProceed": 8200,
          "costBasis": 11500,
          "grossLoss": -3300,
          "washSaleDisallowed": 3300,
          "netLossAllowed": 0,
          "replacementSharesBuyDate": "2025-08-20",
          "replacementSharesBuyPrice": 235.40,
          "adjustedBasisOfReplacement": 11500,
          "inTaxAdvantagedAccount": false
        }
      ],
      "summary": {
        "totalShortTermGainLoss": null,
        "totalLongTermGainLoss": null,
        "netCapitalGainLoss": null,
        "allowableDeduction": null,
        "carryforwardToNextYear": {
          "shortTerm": null,
          "longTerm": null
        }
      }
    }
  }
}

Calculation Rules

Step 1: Identify Wash Sales on 1099-B

• 1099-B Box 1g contains the disallowed wash sale amount.
• Box 5 checked = noncovered security (may have additional unreported wash sales).
• Net loss for each lot = Proceeds − Cost Basis + Wash Sale Disallowance (from Box 1g)
• Enter disallowed amount in Form 8949, Column (g) with adjustment code "W".

Step 2: Adjust Replacement Share Basis

For each disallowed wash sale loss: Adjusted basis of replacement shares = Purchase price of replacement shares + Disallowed loss amount

This preserves the economic loss — it is not permanently lost (unless replacement shares are in an IRA/Roth IRA, where the loss IS permanently lost).

Step 3: Adjusted Holding Period

The holding period of replacement shares includes the holding period of the sold shares when a wash sale occurs.

Step 4: Net Capital Gains/Losses

After all Form 8949 entries:

Total short-term gain/loss (Part I net) → Schedule D Line 7
Total long-term gain/loss (Part II net) → Schedule D Line 15
Prior year ST carryforward → Schedule D Line 6
Prior year LT carryforward → Schedule D Line 14

Net short-term capital gain/loss = Line 7 + Line 6
Net long-term capital gain/loss = Line 15 + Line 14

Combined net = Schedule D Line 16

Step 5: $3,000 Net Capital Loss Deduction Limit

If Schedule D Line 21 shows a net loss:

• Maximum deduction against ordinary income = $3,000 ($1,500 if MFS).
• Enter on Form 1040 Schedule D Line 21, then Form 1040 Line 7.

Step 6: Capital Loss Carryforward

Excess loss (above $3,000) carries forward to future tax years: ST carryforward = net ST loss beyond $3,000 (excess ST loss) LT carryforward = net LT loss (after applying to any ST gain)

Use Schedule D Worksheet in IRS instructions to determine carryforward amounts. Carryforward retains its short-term or long-term character.

Capital Gains Tax Rates (2025)

Note: These thresholds apply to taxable income, not just capital gains. Short-term gains taxed at ordinary income rates.

References

Read skills/tax-domain-harvest/references/wash-sale-rules.md for detailed wash sale examples, substantially identical security analysis, and multi-account wash sale scenarios.