I DO know – short and long term cap gains get taxed at different rates.
Using Turbo Tax though, I just know to drop numbers in the right fields to get things calculated. So I don't know the mechanics at work behind the scenes.
I have a capital loss carryover for both short and long term from 2024.
From what I read, short term carryover offsets short term gains and long term carryover offsets long term…. at least to start. If you have still have short term carryover after that, does it get to be applied to long term gains or vice versa? I'd think there'd be math to take into account that short and long term get taxed at different rates.
in other words, say you have a $400K long term gain in 2025. And a short term carryover of $100K and long term carryover of $100K.
Do you wind up with short term carryover of $100K for 2026?
Or vice versa… if the $400K is short term gain, do you still have the $100K long term carryover?
Along the same lines…. is best practice to try to use up the carryovers as soon as possible? or hold off?
With that $100K short and $100K long term loss carryovers, would you want to sell things with unrealized gains in 2025 to at least use up the loss carryovers? And then you could immediately rebuy / raise your basis.
Capital loss carryovers – short term and long term – can 1 be used for the other?
byu/Kangaloosh intax
Posted by Kangaloosh
4 Comments
Yes, capital losses offset both short and long, regardless of whether they themselves are short and long. You will never have a gain with any carry over loss remaining.
Short-term carryover will first offset short-term gain; similar for long-term. If there is remaining short-term carryover, it will offset remaining long-term gain. (Similar for long-term carryover, short-term gain)
> Along the same lines…. is best practice to try to use up the carryovers as soon as possible? or hold off?
You are required to offset capital gains as much as possible. You can generally only carry over losses in excess on your gains.
THANKS for the info. But don’t know if anyone touched on this? I wasn’t clear when asking?
A short term gain gets taxed at a different rate than long term gain, right? And by extension, having a short term loss will change your tax differently than a long term loss, right? (yeah, $3K loss maximum capital loss on the return).
So do the loss carryovers maintain the short / long term tax rate for this year?
I’m likely muddying the water here… sorry!
Say you have $100K short term gain this year. If your loss carryover from last year is $25K short term, is the tax due to capital gains for this year different than if it was $25K long term?
And same question if you have $100K long term gain this year. Does your tax work out to be the same this year if the capital loss carryover is all short or all long term?
And your thoughts – would you look to use loss carryover as soon as possible (sell more gains this year to have more gains than the loss carryover) or use the carryover this year and then keep carrying it to later years?)