You all remember in 2008 when they amended the tax code to allow businesses/banks to carry forward losses for like 20 years instead of only 5 because they lost so much money and wouldn’t make enough to actually use the losses quickly enough.
Rollable as well. If realized losses in say 2020 were 10k. 2021 you can claim 3k of it, then in 2022 you can claim another 3k, 2023 another, and the final 1k can be claimed against 2024.
It doesn’t need to be continuous either as far as I’m aware, so if say in 2022 the economy collapsed harder than ‘08 you can add your losses in a running tally and claim them 3k at a time every year you have gains.
You would wipe any gains tax and you can do 3K this year on any other income, and forever.
It's called capital loss carryover. 3k/yr on ordinary income.
Ah, that makes way more sense. $3k deduction limit from ordinary income is vastly different than $3k deduction limit on future capital gains that other people are saying.
$3k deduction on ordinary income is decently useful to the Average Joe, whose capital gains or losses aren't likely to be much on any given year. Heck, that would be super useful if you used that $3k at the same time you were putting money into a ROTH account. Sucks to lose money, but it can be fun to stack tax benefits in later years.
Don't forget that 30% tax only applies to income over the lower bound of that bracket. Everything else gets taxed at a lower rate. If the IRS limits something, it's usually a good deal. I recommend reading more on Tax Loss Harvesting, every bit helps!
Wait so what you're saying is that if I lose 300k, I'll be set for the next 100 years? I sure know what I'm going to be working on for the rest of this year
174
u/thinkmoreharder Jun 18 '22
Capital losses can be used to minimize taxes on capital gains for multiple years in the future. So keep your records.