No. of Recommendations: 3
This year I have no gains that could be offset by selling my KMI holdings. Can I short-term loss be used to reduce taxable income such as RMD withdrawals?

Yes, up to $3,000 worth.

If it can and the loss exceeds $3,000, can the excess loss be carried forward to the next tax year?

Yes, it would carry through as a short-term loss.

If you had a long-term capital loss that you carried forward from a previous year and exceeds $3,000, is the short-term loss added to the existing long-term capital loss and carried forward to the following tax years?

If the short-term loss exceeds $3,000, the short-term loss is what will be used to offset current ordinary income. Then the remainder of the short-term loss and the long-term loss will be carried forward, each on their own. Next year, if you have any capital gains, the losses will be matched (by term) with those gains to offset. Then if both categories are losses, you will use $3,000 to offset current income, using up the short-term losses first. If one category is a loss and the other is a gain, the remaining gain will be offset by the loss, and then any remaining loss will be used to offset ordinary income. Any remaining losses after offsetting income will be carried forward, as either long or short-term, as appropriate.

I have the impression that some of you reading this board might be stock traders and have a better understanding of the tax consequences of a capital loss. I would appreciate any insight that you can provide.

Not a trader, but I volunteer to do taxes.

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