I know that after short-term capital losses offset short-term gains, and after long-term losses offset long-term gains, any leftover loss can be used to offset 3,000 in ordinary income each year.
If you have both short-term and long-term losses left over, will TurboTax automatically choose one or the other to offset the 3,000 in ordinary income? And/or is there a way to select which one on my end in the product?
The reason I ask is because my understanding is it could be considered more tax-advantageous to prioritize using the long-term losses to offset first. This is because while long-term loss would normally offset a long-term gain (thereby offsetting $3,000 at the 15/20% capital gains tax rate -- so, that offsets $450 or $600), by having it offset income instead it "upgrades" and offsets a higher amount based on your tax bracket (for demonstration purposes, let's say your bracket is 37% -- that's offsetting $1,110 instead). This upgrade essentially gives your long-term loss an "extra value" of $660 or $510.
In contrast, since short-term losses are taxed at the normal income rate, there's no difference between offsetting a short-term loss or offsetting normal income, so there's no extra value to be gained.
