Short term capital losses

Forum|Forum|4 years ago
April 4, 2022
2 replies
45 views

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?

Best answer by rjs

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.

rjs

Answer

Level 15

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

Level 15

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.

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