Tax Loss Harvesting Question

[ownyourfuture]

Account In Question: Taxable
Filing Status: Single
Wash Sale Concerns: None.

Had a friendly debate with someone concerning tax loss harvesting last night.

She says I can sell shares with long-term capital gains of $10,000.00
Then turn around & sell shares with a loss of $10,000.00, & it's a wash.
(no additional tax liability for me)

I disagreed. I was under the impression that you could only use losses of up to $3000 (married filing jointly) or $1500 (individual) against gains in any particular year. (the remaining capital losses of $8500.00 could be carried over)

In that case, I’d be left with $8500.00 in capital gains for 2020. This would be disastrous for me, as it would put me well over the income cliff related to healthcare insurance subs.

Who’s right ?

 

[Dash man]

Account In Question: Taxable

Filing Status: Single

Wash Sale Concerns: None.



Had a friendly debate with someone concerning tax loss harvesting last night.



She says I can sell shares with long-term capital gains of $10,000.00

Then turn around & sell shares with a loss of $10,000.00, & it's a wash.

(no additional tax liability for me)



I disagreed. I was under the impression that you could only use losses of up to $3000 (married filing jointly) or $1500 (individual) against gains in any particular year. (the remaining capital losses of $8500.00 could be carried over)



In that case, I’d be left with $8500.00 in capital gains for 2020. This would be disastrous for me, as it would put me well over the income cliff related to healthcare insurance subs.



Who’s right ?

You can offset other gains. You can only deduct up to three thousand against other income.

 

[RobbieB]

She's correct.

 

[audreyh1]

Account In Question: Taxable
Filing Status: Single
Wash Sale Concerns: None.

Had a friendly debate with someone concerning tax loss harvesting last night.

She says I can sell shares with long-term capital gains of $10,000.00
Then turn around & sell shares with a loss of $10,000.00, & it's a wash.
(no additional tax liability for me)

I disagreed. I was under the impression that you could only use losses of up to $3000 (married filing jointly) or $1500 (individual) against gains in any particular year. (the remaining capital losses of $8500.00 could be carried over)

In that case, I’d be left with $8500.00 in capital gains for 2020. This would be disastrous for me, as it would put me well over the income cliff related to healthcare insurance subs.

Who’s right ?

You can apply any capital losses against capital gains including long-term capital gains distributions from mutual funds. The $3000 per year loss limit applies to ordinary income only.

 

[Retireby45ish]

She's correct.

Agreed. Can pair off all losses with gains. If losses are larger that’s when you can pair off 3k income in year and carry rest forward at 3k per year thereafter.

 

[LOL!]

She is correct, but be careful because "it's a wash" can mean something else specifically when discussing selling shares in a taxable account. It is not a wash sale. I know you didn't mean that it was.

 

[pb4uski]

She's right. You can offset gains and losses. However if you have net losses then you can use up to $3,000 a year against ordinary income.

 

[ownyourfuture]

The knowledge base here at ERF comes through again!
Thanks

 

[SALTedOut]

once again the female is correct. As always!

 

[VanWinkle]