DC
Guest
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 Posted:
Wed Dec 15, 2004 10:09 am Post subject:
offset capital gains with loss |
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I've often read articles that suggest to offset your capital gains with
losses. That never made sense to me because for a typical investor, the
longterm capital gains rate is 15%, and loss rate is 25%. So if you use them
to offset each other, you're basically paying a capital gains rate of 25%.
Example: you have a capital gains of $2000 in stock GGG. You happen to have
another stock LLL that you can take a loss of $1000. Both are longterm.
1) If you take the general advice, you sell both to achieve a net gain of
$1000, and pay 15% = $150 in capital gains tax.
2) My idea is, sell LLL this December for a loss of $1000. Recuperate 25% of
that on your tax refund = $250. In January, sell GGG for a gain of $2000.
You will pay 15% of that = $300. Net tax paid = $50. That is a third of the
tax you paid with method #1.
Are my assumptions correct? Am I missing something here? Shouldn't the
general rule of thumb be to separate gains and losses into different years?
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Rich Carreiro
Guest
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| Posted:
Wed Dec 15, 2004 1:56 pm Post subject:
Re: offset capital gains with loss |
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"DC" <noreply@fakeaddress.com> writes:
| Quote: | I've often read articles that suggest to offset your capital gains with
losses. That never made sense to me because for a typical investor, the
longterm capital gains rate is 15%, and loss rate is 25%. So if you use them
to offset each other, you're basically paying a capital gains rate of 25%.
Example: you have a capital gains of $2000 in stock GGG. You happen to have
another stock LLL that you can take a loss of $1000. Both are longterm.
1) If you take the general advice, you sell both to achieve a net gain of
$1000, and pay 15% = $150 in capital gains tax.
2) My idea is, sell LLL this December for a loss of $1000. Recuperate 25% of
that on your tax refund = $250. In January, sell GGG for a gain of $2000.
You will pay 15% of that = $300. Net tax paid = $50. That is a third of the
tax you paid with method #1.
Are my assumptions correct? Am I missing something here? Shouldn't the
general rule of thumb be to separate gains and losses into different years?
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(1) GGG might not still be worth $2000 by the time you sell it,
if you wait.
(2) Only the first $3000 of net losses can be taken against
ordinary income. So if you were talking about a $20,000
gain and a $10,000 loss, and did what you describe, you could
only take $3,000 of the loss against your other income.
--
Rich Carreiro rlcarr@animato.arlington.ma.us |
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