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cash from capital loss transaction still income?
Old 12-18-2020, 09:58 AM   #1
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cash from capital loss transaction still income?

First full year of retirement and doing a lot "firsts" this year. Tax loss harvesting is one of the things I did for the first time and I just thought of a question.

If I sold stock

sell price $15,000
cost basis $25,000
loss $10,000


does the $15,000 still get counted in my gross income?
thanks
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Old 12-18-2020, 10:12 AM   #2
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Quote:
Originally Posted by Ole Red 29 View Post
First full year of retirement and doing a lot "firsts" this year. Tax loss harvesting is one of the things I did for the first time and I just thought of a question.

If I sold stock

sell price $15,000
cost basis $25,000
loss $10,000


does the $15,000 still get counted in my gross income?
thanks
No. The only income from selling stocks is a capital gain. Since you had no gain, you will not have income from the transaction and will not have to pay taxes on it. In fact, if that's the only stock transaction you have, you will be able to deduct $3000 of the loss from your taxable income each year until the $10,000 loss is used up. So your taxes will be lower due to the sale and not higher.

Additionally, if you had another stock (or 2 or 3) that you wanted to also sell that have a total gain of a $10,000 gain in basis, you could also sell those tax free. The $10,000 gain on the additional stocks would be offset by the $10,000 loss on your first stock. Net would be a capital gain of $0 and no taxes. This is called tax gain harvesting. If you went this route, you would not also still have the $3000/year reduction to your taxable income.
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Old 12-18-2020, 01:59 PM   #3
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Capital Gain distributions from mutual funds can also be used to offset capital loss carryovers. You don't actually have to sell shares (of stocks or mutual funds) at a gain to offset those losses.
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Old 12-18-2020, 02:22 PM   #4
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You can claim up to $3000 as a capital loss for 2020 or offset gains with that amount from a loss. If you have a gain, it is income but if you have a loss it gets subtracted from income.

I take my taxable brokerage statement to the local tax place and they handle it. Last year, it only cost $90 for Federal and State. No hassle. They file everything and I usually get a deposit in my checking account. I stopped doing my own taxes years ago.
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Old 12-18-2020, 03:40 PM   #5
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thanks guys. I do have capital gain to offset. I sold enough stock at a loss to cover all of my gain plus the extra $3k.
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Old 12-18-2020, 04:38 PM   #6
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If you run it through a tax program, you'll see that your situation

sell price $15,000
cost basis $25,000
loss $10,000


Is no different than

sell price $1,015,000
cost basis $1,025,000
loss $10,000

The gain or loss part is what matters.
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