Can you use your losses to lower your capital gain tax?

[cashclay]

I have read you can however only up to 3000 usd worth? Is this true or am I just getting very confused?

Also what if I happened to lose more than I win in a year?
Does that mean I dont pay any taxes on my wins ?
Sorry Im a noob and taxes are so confusing to me

 

[Overnight]

I have read you can however only up to 3000 usd worth? Is this true or am I just getting very confused?

Also what if I happened to lose more than I win in a year?
Does that mean I dont pay any taxes on my wins ?
Sorry Im a noob and taxes are so confusing to me

You are asking complicated questions, so you should seek a complicated accountant.

It basically goes like this...

If you have, for example, 20K in capital losses in a year, you can claim a max of $3000 of capital loss for that year, and the balance of the losses can be carried forward each year, at $3K per clip, until your losses are drained. It is a shitty system, but it is what it is.

(And by the way, it is "gain or lose", not "win or lose". This ain't a darn lottery.)

 

[cashclay]

jesus! thats so annoying. It really is a shitty system.
So what I dont understand is if i have to pay capital gain tax on what I won minus the 3000 usd max allowed for losses, what happens next year?
If i dont trade the next year, will the govt refund me on 3000 usd max loss tax I file?
Because I already paid the full amount of capital gains the previous year but yet couldnt deduct the full amount of losses on it.

 

[Overnight]

jesus! thats so annoying. It really is a shitty system.
So what I dont understand is if i have to pay capital gain tax on what I won minus the 3000 usd max allowed for losses, what happens next year?
If i dont trade the next year, will the govt refund me on 3000 usd max loss tax I file?
Because I already paid the full amount of capital gains the previous year but yet couldnt deduct the full amount of losses on it.

This is where the whole "Seek a complicated accountant" thing comes in. Seek a CPA, and not this forum.

 

[ph1l]

So what I dont understand is if i have to pay capital gain tax on what I won minus the 3000 usd max allowed for losses, what happens next year?

https://turbotax.intuit.com/tax-tips/investments-and-taxes/capital-gains-and-losses/L7GF1ouP8

Yes, but there are limits. Losses on your investments are first used to offset capital gains of the same type. So, short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. Net losses of either type can then be deducted against the other kind of gain.

So losses in the same year as gains offset the gains.

If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income.

Any excess net capital loss can be carried over to subsequent years to be deducted against capital gains and against up to $3,000 of other kinds of income.

If i dont trade the next year, will the govt refund me on 3000 usd max loss tax I file?
Because I already paid the full amount of capital gains the previous year but yet couldnt deduct the full amount of losses on it.

No, the $3,000 carried over losses offset income, so it's more like a deduction and not like a tax credit.

 

[s trader]

This is my take. Capital loss offsets capital gain fully. Any loss leftover gets deducted against wages income up to 3000.

 

[meatyoaker]

What about trader tax status, mark-to-market election for ordinary income/losses? https://www.thetaxadviser.com/issues/2010/feb/sec475mark-to-marketelection.html

 

[cashclay]

This is my take. Capital loss offsets capital gain fully. Any loss leftover gets deducted against wages income up to 3000.

This sounds much more reasonable.
So for ex. if I have gains of 20,000 and losses of 10,000 then I pay taxes only on the 10,000 gains.
Is this how youre thinking as well?

 

[Overnight]

This sounds much more reasonable.
So for ex. if I have gains of 20,000 and losses of 10,000 then I pay taxes only on the 10,000 gains.
Is this how youre thinking as well?

This is your last warning...SPEAK TO A CPA. STOP TAKING TAX ADVICE FROM PEOPLE HERE. DO YOU UNDERSTAND?

Assuming you are a USA taxpayer, the ramifications of getting it wrong can be severe. NOBODY on this forum is a tax guru. All we can do is give guidance on what we experienced, but everyone's tax liabilities are different. You must seek professional help in your state of residence, unless you live in a state that has no state income tax.

YOUR tax situation is unique TO YOU!

Aside from that, seek one for the nasty Fed return. Run like hell from this section of the forum if you are seriously earning money, dude. Trust me.

 

[MoreLeverage]

So for ex. if I have gains of 20,000 and losses of 10,000 then I pay taxes only on the 10,000 gains.

Yes exactly. You don’t need a CPA to tell you the basics of capital gains. It just following the tax instructions on the 1040 and associated forms.