Sell stocks at loss to compensate CD interests gains

[Juem0126]

Hi there,

If I sell stocks at loss, can I use that loss to avoid taxes on my CD interests gains?

[rschule1]

Hi There:

I'm assuming this will be for tax year 2023 since losses are claimed in the year incurred. Anyway up $3000 in stock losses can be claimed against interest and dividend income in the year incurred.

[bkaytaxes]

Greetings @Juem0126!

This is a wonderful questions.  Harvesting losses are when we sell stocks or other securities at a loss to offset gains.  It is a great strategy if implemented correctly.  In your case you have a loss on stocks which is considered a capital loss  and income from CD interest which is considered ordinary income.  The great news is even if you don't have capital income to be offset by the capital loss, up to $3,000 can be used to offset ordinary income!  So in summary yes it can, but the amount of loss would be limited to $3,000.  Any excess will be roll over until used.   

Best of luck on your investment journey!!

[Juem0126]

What if some of the stock were bought last year 2022, and some bought in 2021? All of them are at loss now. @rschule1 

[bkaytaxes · Accepted solution]

Excellent question!  When you sell stock you report the loss in the year in which they are sold.  The date of purchase is used to determine  how long you held the stocks before you sold them.  The longer you hold a stock the better the tax rate (in the case of a gain).   Short term (under 1 year) or long term (more than one year).  In your case, if  sell today at a loss, you would report the sale on your 2023 tax return.   Capital losses can be carried forward indefinitely until fully utilized or exhausted. There is no expiration date for capital loss carryovers.