The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: tax penalty on stocks sold in less than a ye||Date: 12/31/2008 3:07 PM|
|Author: vkg||Number: 103266 of 121217|
But even though the short term capital gains tax rate is higher than the long term rate, they allow you to offset short term capital gains against long term capital losses, right? I never quite understood this, not that there is any "understanding" inherent in tax laws! They allow you to offset a higher tax rate item against a lower tax rate item.
Offsetting of gains/losses is done is a specific order:
1.) Short term losses offset short term gains
Long term losses offset long term gains
2.) If there are any remaining losses:
short term losses offset long term gains
long term losses offset short term gains
3.) If there are any remaining losses
$3,000 can be used to offset regular income
4.) Any remaining losses are carried forward
It is to the taxpayers advantage when long term losses offset short term gains, but to their disadvantage when long term gains are offset by short term losses.
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