If you’ve been keeping tabs on your stock market investments and seeing a lot of red lately, you’re not alone. While we still have over six months before the end of the year, it doesn’t hurt to brush up on your capital gains and losses rules now, rather than in the last few weeks of the year.
Short term and long term capital gains are taxed at two different rates. Short term capital gains are taxed at your marginal tax rate. Long term capital gains are taxed at either 0%, 10% or 15% depending on your capital gains rate. You can have significant tax savings by waiting at least a year to sell your profitable positions.
When it comes short term and long term capital losses, you apply the loss against the same type of gain when you can, then you move towards short term. For example, if you have a long term capital gain of $1000 and a short term capital gain of $1000 and a long term capital loss of $1000, you reduce the long term gain by the amount of the long term loss. If you had the same gains but a short term capital loss of $1000, then you deduct it from your short term loss. If you had, instead, a short term loss of $1500, then the first $1000 goes against the short term gain with the last $500 going towards the loss.
If you don’t have enough gains for your losses, you can deduct up to $3000 of loss against your personal income. If you have more than $3000 of loss, you can push that forward indefinitely year after year.
Tags: Investing, Taxes
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[...] from Daily Money Hacks helps you brush up on federal tax laws governing stocks in Excess Capital Loss Rules. With the market going the way it is, this article could come in [...]
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