Tax loss harvesting to offset realized capital gains

[bjf412]

Hi. I am selling some sizable stock (from taxable brokerage account) this year to prepare for paying cash for an upcoming new home purchase. I've already taken one distribution with a net long-term capital gain of roughly $43,000. I could take another distribution now that would have a net long-term capital loss of roughly $23,000. I know there is a $3,000 annual limit to tax loss harvesting applying to one's ordinary income. Does the same limit apply to the $43,000 in gains that I've already realized this tax year, or would I be able to net out the $43,000 gain with the $23,000 loss and end up with a net taxable gain of $20,000? Thank you for your insights. 

[NCperson · Accepted solution]

yes, you can net the gains against the losses..  if that results in an net loss, you are correct that only $3000 of the loss can be used each year to reduce your other income. 

so in your example, you would report a $20,000 net capital gain (long term)

note that you can't use $3,000 of the loss and reduce your ordinary income first and then report a long term capital gain of $23,000 (using your example).  it doesn't work that way. 

[Mike9241]

the $3,000 limit is on net capital losses.   first short-term are netted. then long-term are netted.

if one type is a gain and the other is a loss they are netted. if the net is a loss up to $3,000 is allowed

so in your situation, you would end up with a net LTCG of $20,000

[bjf412]

Thank you - much appreciated!