Can I offset a large capital gain on sale of a house with a capital loss in the stock market?

[rhodion]

I sold a house in 2021. Capital gains taxes (not just gains) will be almost $500,000. If I have capital losses of a similar magniture in the same year would that negate my taxes?

[tagteam]

You can use your losses from stock market transactions to offset the gain on the sale of your house (provided you are not in the business of flipping houses).

This may not help much if the actual tax on the gain from the sale of your house is $500,000, but you can take advantage of the Section 121 exclusion if you owned and used the house as your primary home for the last two out of five years leading up to the sale.

See https://www.irs.gov/taxtopics/tc701

[rhodion]

No, not a flipper. It was our primary  residence and so we can claim the exclusion, but I will still owe the 500K even after that! Let me break it down into two sub questions:

1. Do the gain and loss have to be of the same type to offset each other? long term versus short term or property versus stocks?

2. Does each S100 of loss cancel $100 of gain so that the loss actually saves me $25 if the tax rate is 25%?

[Critter-3]

ALL  cap gains & losses are netted against each other on the Sch D no matter their holding periods. 

[tagteam]

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@rhodion wrote:

Does each S100 of loss cancel $100 of gain so that the loss actually saves me $25 if the tax rate is 25%?

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Yes, and the maximum long-term capital gains tax rate is 20% (but you also are in NIIT territory, so you need to add 3.8%).

See https://www.irs.gov/taxtopics/tc559

[NCperson]

see this link:

https://turbotax.intuit.com/tax-tips/investments-and-taxes/capital-gains-and-losses/L7GF1ouP8

1) they don't have to be of the same type.  The profit on the House sale and the stock market transactions all end up on Schedule D.  Read the link

2) Yes, but note that if losses exceed gains, only $3000 can be deducted on the tax return; the rest is deferred into the future.

[TomD8]

To clarify @NCperson's answer: if your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 16 of Schedule D (Form 1040).

[SweetieJean]

If you will owe $500,000 in taxes, please see a tax professional.  Also see:

What Is the Net Investment Income Tax? (thebalance.com)

[SweetieJean]

Is this the same house that you talked about in your other series of posts, the one in which you said this:

 It was rented until the middle of 2020 and vacant from then until the time of sale.

[rhodion]

yes, same house

[rhodion]

no, sorry, not the same house. the rented house was in WA. the 500k tax house was in CA