Newsletter 2014
Newsletter 2014
Capital Losses
Capital Losses
Print Full ArticleLast Reviewed: Jan 2015
Last Modified: Jan 2015
If you have carryover capital losses from a prior year or have unrealized losses you want to harvest in the current year you can use these to offset capital gains dollar for dollar. The normal rule requires you only use up to $3,000 in capital losses to offset any type of income. This is a special rule that applies to reduce capital gains and makes faster use of the losses. However, this is not necessarily the most efficient use of the loss as offsetting ordinary income at its higher tax rate saves more money in the long run. But, if you have an asset with lots of gain and a large loss to work with you can match up the two for a one-time, current year tax savings. A word of caution here; capital losses carry forward until used, but do not carry back. One of the biggest tax mistakes you can make is incurring a capital gain one year and a capital loss the next. The better strategy is to reverse that order, incurring the loss first and allowing it to carry forward and offset the gain the next year.
These are just a few of the tax strategies available to manage increasing income. There is a great deal of detail involved in understanding how these rules might apply to your particular situation so we encourage you to consult your financial and tax adviser if you have questions about them and the benefit they may provide.
