Year-end tax planning? Here's how gains and losses work
Question: If I have a capital gain of $5,000 and a loss of $10,000, can I write off the entire loss plus the $3,000 to offset ordinary income?
Answer: No.You haven’t made quite enough in capital gains to do that this year.
The tax law allows you to use capital losses to offset capital gains, which are typically profits on stocks or mutual funds. So you’d take $5,000 of your loss and use that the offset $5,000 of your gains. From the $5,000 in losses that you have left, you could use another $3,000 to offset ordinary income, typically the kind you earn from your job.
You’ll have $2,000 in losses left, to use in future tax years. You get to roll it over until the losses are all gone. You can use up to $3,000 a year to offset your ordinary income.
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