A question about taxes

I understand that short term capital gains can offset short term capital losses. And that long term capital gains can offset long term capital losses. But can you use short term capital losses to offset interest from money markets, savings, dividends, and just flat out normal income since they are taxed at the same rate?

Aaaahhhh, this was supposed to be in General Questions. I am sorry. This is what I get for having multiple monitors with multiple instances of Firefox and the SDMB on each.

Actually I already found the answer and it appears to be that you can up to $3,000 and you can even carry it forward with some stipulations.

http://www.bogleheads.org/wiki/index.php/Tax_Loss_Harvesting

That’s really cool.

I moved it for you, but I’m leaving it open even though you seem to have answered the question, just in case others have comments.

It’s not just short-term capital losses that you can offset (going back to the question in the OP); you can offset any capital loss against regular income - but you must offset against capital losses first and only if there are unused losses can you offset the next $3,000 against income (and carry forward the remainder).

(bolding mine)

Did you mean that you must offset capital losses first with capital gains and if there’s any left you can offset against income up to $3,000 (and carry forward)? That would make the most sense since it would favor the IRS (ie, the IRS forces you to offset the lower taxed capital gains before coming to the heavier taxed income)

Yes - sorry - that is what I was trying to say.

Thanks amarone. I am really surprised they allow this. This seems like a tremendous advantage when used with tax loss harvesting (cashing in down stock to capture your capital loss and then 31 days later buying the same stock again at hopefully an equivalent or even less value to put yourself in essentially the same position as before but with all of these capital losses to use up in future years. Combine that with 15% long term capital gains taxes and I can easily see how those who get most of their income from investments pay very little tax. It’s really interesting to say the least.

That’s pretty much what I just did. Because of the recent huge market drop I did some stock selling and was able to capture more than $30,000 in capital losses. (I bought other stock so I could stay in the market while avoiding the wash sale rules.) I figure that I’ll be able to avoid paying any capital gains taxes for years, plus I’ll have the $3,000 to knock off my income every year until it’s used up.

Ed