Sold my house. Have capital gain. Want to sell some stock having unrealized capital losses to offset the capital gain. Better to sell stock having short-term or long-term capital losses? Or does it not matter overall?

[kwt89]

- I sold my house (live in fiance's house now).  Have long-term capital gain of $100K from the sale (after deducting the primary residence exclusion)

- No other long-term nor short term capital gains/losses so far in 2022

- I have stock whereby currently the unrealized short-term capital loss is (-$80K) and long-term capital loss is (-$50K)

I would like to offset the $100K capital gains by selling some of my stock (ideally sell stock that adds up to $100K capital loss so there is no net capital gain for 2022).  Is it more beneficial from a tax savings perspective to sell more of the stock with a long-term capital loss, or a short-term capital loss, or does the proportion not matter? e.g:

- Case A: sell stock that results in $50K long-term capital loss and $50K short-term capital loss?

- Case B: sell stock that results in $80K long-term capital loss and $20K short-term capital loss?

- or any other Case? or does not matter overall?

Just wanted to see if there were conditions that I may not be aware of to factor into the decision-making on the stock selling.

[Hal_Al]

It does not matter.  Capital losses are first applied to similar gains (e.g. long term to long term) and anything left over is applied to the other (e.g. long term losses to short term gains). 

[Mike9241 · Accepted solution]

from a tax standpoint for the tax year of the sale, it really doesn't matter. if you sell a stock at a loss and you want to reacquire it (just taking a loss  to offset that gain) you have to wait until 30 days after the date of the sale to reacquire, otherwise, the loss sale rules will apply and the loss will be disallowed.  even when the loss was taken in 2022 and the reacquisition was in 2023.

other thoughts. how much do you save by taking the loss? long-term gains (the house sale) get special tax rates, so it's possible that taking the $100K loss is not that beneficial and it would have been better to pay the 2022 tax to preserve the capital losses which of course will change with time. 

one could also argue it might be better to take the long-term losses to preserve the short-term losses in case you have taxable short-term gains in 2023. but then those loss stocks would have to be sold before they turn into long-term.      

there is probably no right answer.