Capital Losses Can Offset Capital Gains

Capital losses can offset capital gains. If total losses

exceed total gains, the net losses can offset up to $3,000 of “ordinary” income such as wages per year.

Another benefit is that unused capital losses can be carried forward to offset future capital gains and ordinary income.

Short-term capital gains are those on investments held a year or less. They are taxed at the higher rates that apply to ordinary income.

Long-term capital gains are profits on investments held longer than a year. They

are taxed at favorable rates of 0%, 15% or 20%.

The favorable lower rates for long-term gains also apply to dividends that are

“qualified,” which are most of them. Other dividends are taxed at the higher rates for ordinary income like wages.