Short term capital losses

[ssf-gm]

If I have short term capital losses, it seems most beneficial to offset those against income taxed at the highest rate, i.e. short term capital gains or normal income. If I also have long term capital gains, do I have to offset the losses vs those when that is less beneficial, or am I allowed to carry these losses over into the next year instead?

[rjs · Accepted solution]

You have no choice about how or when the capital losses are applied. The tax laws determine how the calculations are done. You cannot choose to put off claiming a capital loss.

[MaryK4]

The rules for capital losses are as follows:

To figure your total net gain or loss, combine your net short-term capital gain or loss with your net long-term capital gain or loss.

If your capital losses are more than your capital gains, you can claim a capital loss deduction.  The maximum deduction you can claim in a year is $3,000, the remainder (if any) is carried over to the next tax year.

When you carry over a loss, it retains its original character as either long term or short term. A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains.

If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit.