Question

Should I sell stocks and make capital gain to offset the capital loss carryover?

Forum|Forum|4 years ago
November 21, 2021
1 reply
0 views

If I'm not wrong, Capital loss carryover is deducted from Ordinary income (1040, line 7).
Question: when is it convenient to sell stocks and make capital gain to use the capital loss?

TurboTax Premier Online

M

Mike9241

only $3,000 of net capital losses can be used in any year to offset ordinary income. the timing of realizing capital gains to offset capital losses is a personal decision. taking capital gains to end up with a net LTCG for the year is not necessarily bad because you may fall into the 0% tax bracket on them whereas next year LTCG could cost you 20% in taxes. of course with constant tax law changes it's difficult to know the best strategy to minimize taxes. It happens that some taxpayers decline to take gains because they don't want to pay the taxes only to see the price crash and end up with less $$$$ than they would have had if they sold earlier and paid the taxes.

A

Anonymous_

Employee

See https://www.irs.gov/taxtopics/tc409

Good, basic information.

fanfare

Employee

If you want to sell stocks with gains and use your carryforward loss to offset that gain, go right ahead.

Nothing wrong with that.

You can then buy the stock back if you think it will continue to rise.

Your basis is now the buy-it-back price.

If you want to sell current holdings with a loss to offset stocks with gains, you can't buy that loser back right away because that triggers a Wash Sale.