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Stock Sales: Year End Tax Harvest Strategy



If you're doing year end planning and  are taking another look at your gains and losses from stock sales this year,  this one's for you.


The annual maximum net capital loss deduction is $3k. In other words, if you add up all your capital gains and net them against all capital  losses, and the result is a loss that is more than $3k,  then $3k is the maximum that can be deducted in 2023, with the remaining unused loss carrying over to be used up against future year capital gains.


For example,  let's say your gains from stock sales in 2023 were $50k. Let's also say that your gains from other investment activities (real estate / small business k1) were $25k. That's $75k of capital gains.


Let's also say that you have losses this year in the stock market of $100k.


Your net capital loss for the year is (75k - 100k) $25k.


Of the $25k, $3k can be deducted on the 2023 tax return. Leaving $22k to be carried over and used up against future year capital gains.


STRATEGY....... If you already know that you have net capital losses for the year,  you may want to sell off other positions that generate gains. So that you can use up the excess unused loss this year. Consider my example: $22k are the net unused losses.  If you sell off positions before 12/31 that produce $22k of gains,  no tax will be owed on those gains this year.  Because you're using up more of your losses.


If you have questions, please let me know.

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