US Taxes - Handling Capital Losses from previous years with current capital gains

Question

So here is my scenario, I have $10,000 short term and $12,000 long term capital losses carried from a few years ago. Right now I have $30,000 in short term gains that I have not sold yet. I am thinking about selling at least some of it now, but I am also thinking about holding some of it for a long term gain. How can I minimize my tax liability?

Also consider my current $30,000 gain is not locked in so waiting a year could cost me those gains. Finally if I were to hold it and sold it all at long term gains, could I apply it towards previous years short term losses in addition to long term losses?

Answer 1

No one can advise you on whether to hold this stock or sell it. Your carried losses can offset short or long term gains, but the long term losses have to be applied to offset long term gains before any remaining losses can offset short term gains.

Your question doesn't indicate how long you have to hold before the short term gains become long term gains. Obviously the longer the holding period, the greater the risk. You also must avoid a wash sale (selling to lock in the gains/reset your basis then repurchasing within a month).

All of those decisions hold risks that you have to weigh. If you see further upside in holding it longer, keep the investment. Don't sell just to try to maximize tax benefits.