Capital Losses Not Offsetting Capital Gains

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From the web for Turbo Tax: Yes, but there are limits. Losses on your investments are first used to offset capital gains of the same type. So, short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. Net losses of either type can then be deducted against the other kind of gain.

This isn't happening on my return, as I am paying tax on long term gains/distributions than are more than offset by short term losses.

TurboTax Home & Biz Windows

rjsAnswer

Level 15

How do you know that you are paying tax on long-term gains? Look at the actual tax form, not a summary screen in TurboTax. What is the amount on Form 1040 line 7? That's the net gain, if any, that you are paying tax on. If Form 1040 line 7 is negative, you have a net loss and you are not paying tax on any gains.

rjs

Answer

Level 15

LaughTrackAuthor

Level 5

Thanks. Looking at the forms cleared up my confusion.

k-hillis

Level 2

I have short term gains and long term losses. Turbo tax is not allowing me to offset the short term gains with L/T gains and I'm being taxed on S/T gains while losses are carried forward.

Mike9241

Level 15

NET short term gains are reduced by NET long term losses. if net long term losses exceed net short term gains the smaller of the net or $3K is deductible ($1.5K if Married filing separate). if net short term gains exceed net long term losses you're taxed on the net short-term gains which are taxed as ordinary income. Turbotax seems to be doing it correctly.

Mike9241