Capital Gain/Loss Offset

[NCperson]

@crajarshi to asnwer your specific quesztion, and what you state is a little confusing, so let me restate it.

You owe the IRS $70,000 from the 2021 tax year

You now have a loss of $68,000 on 2022 trades

1) you still have to pay the $70,000if

2) the $68,000 can be used to offset gains from sales in securities from 2022 forward.  If you don't have any gains in a particular year, $3,000 of the loss can be applied to reduce your ordinary income. 

[crajarshi]

Thanks for the reply, I should have been more clear, my marginal tax bracket is 37%. The tax I say owe is for current year 2022 as my company only withholds 22% when the RSU vests every month. I'm trying to pay taxes so that the tax bill doesn't come with a penalty. The shares I've sold ( a portion of my RSU that was vested in 2020 and 2021) is also in 2022 July and August. 

So considering that both events( less withholding of salary in 2022 as well as the capital loss from selling shares in 2022) happened in current year should I pay 2K ( difference between my withholding and capital loss) or 70K?

[NCperson]

@crajarshi - i am still not following, but understand more.

1) I understand that you are in the 37% tax bracket, but the company is only withholding at 22%.  this is ordinary income.  So it appears, all things being equal, you should pay estimated taxes on 15% times the income reported on your W-2 that represent that vesting of the RSUs,  

2) Once those RSU's vest, please do not refer to them as "RSUs", as that adds to the confusion.  You simply own the shares.  They are no longer RSUs. 

3) So sounds like you sold some of the shares you were holding to raise the money to pay the tax in #1 above. but if you sold those securities at a loss, that loss can only be netted against gains on other asset sales. Alternatively, a maximum of $3,000 of losses can be netted against ordinary income, but since you are in a 37% tax bracket, that will only reduce the taxes you owe by ~$1,100  ($3,000 times 37%)

lastly, if your are in the 37% tax bracket, have a tax liability of $68,000, it is probaby in your best interest to have a tax account do your taxes.  there is high likelihood that there are tax benefits you are missing that a tax accountant could quicky find to justify his cost.   Example; if you 'screw up' the estimated taxes, the interest penalties could justify the cost of the accoutant!

Also, don't forget state taxes

.

[fanfare]

"Alternatively, a maximum of $3,000 of losses can be netted against ordinary income, but since you are in a 37% tax bracket, that will only reduce the taxes you owe by ~$1,100  ($3,000 times 37%)"

@NCperson 

You make it sound disappointing.

The higher your bracket, the more valuable a $3,000 deduction is.

Also this is not an alternative, if losses are not offset completely, you still get the (up to) $3,000 deduction.

@crajarshi 

If you use TurboTax CD/Download (not TurboTax Online) you can do a TRIAL 2022 tax return and enter all these amounts. and get your future tax situation in detail.  You still have to extrapolate what will happen for the rest of 2022 but so would a CPA have to do that.

[NCperson]

@fanfare it IS disappointing!

If there were capital gains of at least $68,000 this year, then those same losses could reduce the tax burden by 23.8% times $68,000 or $16,184 (I am assuing the OP's income is high enough that the 20% capital gains rate comes into play).

but given the $3,000 annual limitation, that same $68,000 loss is ONLY going to reduce OPs taxes by $1,110 each year for 23 years. ($3,000 times .37% amd assuming no future capital gains).  Discounting for the time value of money and it's worth even less than that,

[fanfare]

@NCperson 

at  any time over the next 23 years, soon or not so soon, capital gains may occur, and then the tax reduction you are pining  for will be realized.