Question

Capital Loss Carryover - Do long term gains offset short term losses?

Forum|Forum|6 years ago
April 14, 2020
2 replies
0 views

I understand short term losses offset with short term gains. Long term losses offset long term gains. I also understand you may carryover a capital loss multiple years, $3000 per year.

However, what would happen if there is only a short term loss, and a long term gain?

For example, let's assume I have short term capital loss of $30,000 in the year 2020. Assuming I have no other gains or losses, I can deduct $3000 carryover per year for the next 10 years. However, what would happen if I have a long term capital gain of $10,000 the following year (2021)? If I didn't have any short term gains, how do short term losses offset long term gains in taxes with they carryover rule, given they are usually taxed at different rates? Most, importantly, does TurboTax take all this information into account?

J

JotikaT2

Yes.

The short term capital loss carryover from 2020 can be used to offset the long term capital gain in 2021.

Typically, the short term capital loss carryover would be used to offset the short term capital losses, and the long term capital loss carryover would be used to offset the long term capital losses in a current year.

However, when there is only one type of capital loss being carried over, it can be used to offset the current year capital loss regardless of it is for a short term or long term capital loss.

And yes, TurboTax will know to apply the capital loss carryover accordingly as long as you have the capital loss carryover entered into the program.

Capital loss carryover

Capital loss ordering

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S

samimi12

can you offset short term gains with a long term loss ?

A

Anonymous_

Employee

@samimi12 wrote:

can you offset short term gains with a long term loss ?

Yes, but note that losses from the sale of personal-use property are not deductible.

See https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0

A

a_p78

Employee

If I have capital loss carry forward from previous years. In year 2021, I have both long term and short term capital gains. Will my capital loss carry forward be used to offset my short term gains and then applied to long term gains?

M

Mike9241

your capital loss carryover can be short-term, long-term, or a combination of both. short-term c/o offsets current year short-term gins. long-term c/o offsets current year long-term gains.

you can end up with net STCL and net LTCL. then (1) up to $3,000 of net capital losses can be used to offset other income with STCL used first then LTCL

net STCL and net LTCG. - they're netted. if a net loss (1) applies

net STCG and net LTCL - they're netted. if a net loss (1) applies

G

gamix

How about LT loss carry over being applied to future ST gains? I ask this way because the tax rates are higher for ST gains and it doesn't seem logical one could nullify the higher rate, with a previous LT loss. This is the opposite of the "ST loss carry forward, offsetting LT gain" condition, which we know is possible. Thanks.