Wed, November 27, 2024
[ Wed, Nov 27th 2024 ]: Thomas Matters
Capital Losses and Tax
Tue, November 26, 2024

Capital Losses and Tax

The article from Investopedia discusses how capital losses can be used to offset capital gains for tax purposes. It explains that when an investor sells an asset for less than its purchase price, the loss can be used to reduce taxable income. Specifically, short-term losses (from assets held for one year or less) can offset short-term gains, while long-term losses (from assets held for more than a year) offset long-term gains. If capital losses exceed gains, up to $3,000 can be deducted from ordinary income each year, with any remaining loss carried forward to future tax years. The article also covers the "wash-sale" rule, which prevents investors from claiming a loss if they buy the same or a "substantially identical" security within 30 days before or after the sale. This rule aims to prevent tax manipulation through the quick repurchase of securities. Additionally, the piece provides strategic advice on tax planning, suggesting that investors should consider the timing of selling assets to optimize their tax situation.

Read the Full Investopedia Article at [ https://www.investopedia.com/articles/investing/062713/capital-losses-and-tax.asp ]