Taxes on stocks/cryptocurrency day trading

Question

I understand that stocks and crypto are treated as capital gains when a net profit is made, and taxed as such in the United States. My question is what happens when a particular stock or set of stocks is traded frequently throughout the year (day trading).

If one has Stock A and they sell it for a profit of 1000$, but then buy it back and sell it for a loss of 2000$, is a tax paid on the intermediate 1000$ capital gains (buying and selling occurred within the same year)? Similar question: what if after making a profit of 1000$ on Stock A, it is invested into Stock B and sold for a loss of 2000$?

Are intermediate profits considered in capital gains taxes or only the net capital gains for the year?

Answer 1

Every closed position in a security results in a capital gain or loss.

A wash sale occurs when you sell a security at a loss and purchase that same security or “substantially identical” securities within 30 days before or after the date that the aforementioned loss was realized.

If you trigger a wash sale, the loss is disallowed (as in deferred) and the loss is added to the cost basis of the repurchased security. When that "substantially identical" position is closed, you will be able to claim the deferred loss.

Answer 2

In the US, capital gains taxes are not paid immediately. In some cases, your broker may withhold tax from certain transactions, and you may need to pay estimated taxes quarterly, but the actual tax due is computed based on transactions for the entire calendar year (plus any carryovers from previous years).

All of your transactions for the year are split into short-term and long-term capital gains, and the net total for each (profits minus losses) is used to calculate your tax liability. Any difference between what tax is due and what was withheld or paid in estimates is added to (or subtracted from if you overpaid) your income tax return.

So in both of your scenarios, if those were the only two trades you made in the entire year, you'd have a net short-term loss of $1,000.

Answer 3

Take a look at this source on this topic Wash-sale rule for stocks from Investopedia. But Crypto is not subject to it.