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What is the IRS rule on how to use short term and long term losses?
Let's say, My tax situation is as below. Can I offset my entire short term capital gain using both short term and long term capital loss?
| Type | Amount |
|---|---|
| Short term capital gain | 1,500 |
| Long term capital gain | 500 |
| Short term capital loss | -1,000 |
| Long term capital loss | -1,000 |
Yes, you can. You'll first use long term capital loss to offset your long term capital gain and short term capital loss to offset your short term capital gain. Once no matching term capital gain left you can use the remaining capital losses to offset the remaining capital gain. Once no more capital gain left to offset, you can use the remaining capital losses to offset regular income, up to $3K per year. What's left will be carried over to the next year, rinse and repeat.
