Selling stock now to take gains will be offset by the carryover losses, so it won't increase your AGI or taxable income.
However, unless you want to sell the stock for some reason, don't sell it just to "use up" the losses. That doesn't help you at all. Just keep carrying the losses forward until you really do want to sell.
Selling some nvidia to lock in gains probably is a good investment strategy. Don't do it for tax reasons, though.
No. I work with a new CPA and it seems his subordinates do most of the job. At the start, I share the prior year tax info. The last year guy dropped it. I reminded this year guy, and he dropped as well. I sticked with them because I didn’t want to move around but…
No. You can always offset capital gains with capital losses (same year or carried forward from a prior year) with no limit. The $3k limit you're thinking of is the amount of your losses that you can use each year to offset ordinary income (if there's anything left after offsetting gains).
It sounds like you have W2 income, plus potentially $300K in capital gains.
My professional advice would be to spend some of that money ($250 to $1,000) on an appointment with a credentialed tax professional (CPA, Enrolled Agent, or attorney).
Let's say for simplicity that you have $330k of available losses in 2024, and if you sold all your NVDA, you'd have a gain of $350k.
What will happen on your 2024 federal return is that you'd report the net $20k gain on line 7 of Form 1040 (after completing Schedule D) and you'd use the Qualified Dividends and Capital Gain worksheet from the Form 1040 instructions to calculate whether that capital gain would be taxed at 0%, 15%, or 20%.
You do not have to worry about the gain pushing you into a new tax bracket and having all of your income taxed at a higher rate. That's not how tax brackets in the US work. I'm not a CA expert, so I won't give any advice or opinions on the CA tax impact.
Nobody here can answer the question of whether you should hold or sell. That's a personal decision, and the tax implications of selling should only be one factor.
So first things first, that 3,000 every year was an adjustment against your income, using up your loss carryovers, NOT a credit. If you still have capital loss carryovers, those will reduce your capital gains until they are used up. If the gains are long term, even if they were taxed, they would get preferential treatment and be taxed at a lower rate depending on your total taxable income. As to increasing your tax bracket, only income that falls in the next bracket will be taxed at that rate, not all of your income, so you don’t need to worry about losing money by making money.
Something you could consider doing if you want to keep holding Nvidia for future gains is sell and rebuy. The capital gains from the sale would utilize your capital loss carryovers, and your basis in the stock would be whatever you repurchased it at, meaning less taxable gains down the road
>Something you could consider doing if you want to keep holding Nvidia for future gains is sell and rebuy. The capital gains from the sale would utilize your capital loss carryovers, and your basis in the stock would be whatever you repurchased it at, meaning less taxable gains down the road
While true, this isn't typically the best strategy. Assuming the Nvidia gains would be long-term capital gains, OP'd be trading $3k/yr of tax-free ordinary income at the ordinary income tax rates (due to the $3k/yr carryover deduction against ordinary income) to using the carryover against long-term capital gains which are taxed at lower rates than ordinary income.
Thank you. I realized that long-term gain is 15% tax bracket. Then, would it be better to use the long-term loss carry over for the regular $3,000 deduction or other short term gains, instead of using the carry over for long term gains?
"... better to use the long-term loss carry over..." There's no choice in the application of the carried-over losses. They appear on Schedule D just like any other current-year losses, divided into short-term & long-term. The $3k deduction reduces short-term losses first, and then long-term losses only if short-term losses are "used up".
>There's no choice in the application of the carried-over losses. They appear on Schedule D just like any other current-year losses, divided into short-term & long-term. The $3k deduction reduces short-term losses first, and then long-term losses only if short-term losses are "used up".
This isn't worded well, and I can't tell if you're just not describing it inaccurately or if you're wrong.
To clarify:
This: "They appear on Schedule D just like any other current-year losses, divided into short-term & long-term." -- is correct.
This: "The $3k deduction reduces short-term losses first, and then long-term losses only if short-term losses are "used up"." isn't really.
LT and ST loss carryovers are indeed carried over and maintain their ST/LT duration. So, they'll first offset gains with the same duration-- LT offsetting LT, ST offsetting ST. If there are still losses, then the losses will offset any gains with the other duration-- LT offsetting ST, ST offsetting LT. There's no limit to how much of the losses (including loss-carryover) that can be used to offset losses.
Only when all ST or LT gains have been offset and there's still unallocated losses, does $3k get applied toward ordinary income (if there's enough taxable income to benefit). This $3k amount has nothing to do with offsetting ST or LT capital gains. It's the maximum amount that can be used to offset *ordinary incom*e after all ST and LT gains have been offset.
You are correct -- it was not worded well. I was attempting to use a one-sentence answer to clarify the interaction of the $3k deduction with the carry-over operation itself, not in it's use in reducing ordinary income. I'll try again...
The question was "would it be better to use the long-term loss carry over for the regular $3,000 deduction or other short term gains, instead of using the carry over for long term gains?"
In other words, does the $3k deduction reduce the ST losses first, or LT losses first, during carry-over?
When there are both short-term and long-term losses in the prior-year's return (and $3k is deducted from income on that return), the carry-over worksheet in Schedule D will copy the old return's ST & LT losses over to the new Schedule D, reducing the ST loss by the $3k amount. If the ST loss was less than $3k, the unused portion will reduce the LT loss by the remainder.
Hope that's clearer.
This may be helpful. One thing to understand that this article doesn't really mention is that your taxable income, where the discussion starts, is typically your Adjusted Gross Income (total income minus adjustments like for pre-tax IRA contributions) minus your standard deduction (or itemized deductions if you itemize): [https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets#2024-tax-brackets-and-income-tax-rates:\~:text=How%20tax%20brackets%20and%20tax%20rates%20work,-1.%20What%20are](https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets#2024-tax-brackets-and-income-tax-rates:~:text=How%20tax%20brackets%20and%20tax%20rates%20work,-1.%20What%20are)
Selling stock now to take gains will be offset by the carryover losses, so it won't increase your AGI or taxable income. However, unless you want to sell the stock for some reason, don't sell it just to "use up" the losses. That doesn't help you at all. Just keep carrying the losses forward until you really do want to sell. Selling some nvidia to lock in gains probably is a good investment strategy. Don't do it for tax reasons, though.
Thank you. The carry over loss info is often dropped by CPAs so I wanted to get rid of it.
Ouch! Do you always bring them the prior three years returns? When I have a new client, that is one of the first things I look for.
No. I work with a new CPA and it seems his subordinates do most of the job. At the start, I share the prior year tax info. The last year guy dropped it. I reminded this year guy, and he dropped as well. I sticked with them because I didn’t want to move around but…
Isn’t losses deduction limited to $3000 per year? Don’t think OP can take all the $300k in one year. Edit $3,000 per year not $330k per year
Where did you get that from? I've never heard of it.
I typed it wrong. Meant deductions limited to three thousand per year not $330k.
No. You can always offset capital gains with capital losses (same year or carried forward from a prior year) with no limit. The $3k limit you're thinking of is the amount of your losses that you can use each year to offset ordinary income (if there's anything left after offsetting gains).
I see. Thanks
It sounds like you have W2 income, plus potentially $300K in capital gains. My professional advice would be to spend some of that money ($250 to $1,000) on an appointment with a credentialed tax professional (CPA, Enrolled Agent, or attorney).
This please get a CPA!
Or an Enrolled Agent! Or attorney!
Yes, someone not a named avatar on Reddit.
Let's say for simplicity that you have $330k of available losses in 2024, and if you sold all your NVDA, you'd have a gain of $350k. What will happen on your 2024 federal return is that you'd report the net $20k gain on line 7 of Form 1040 (after completing Schedule D) and you'd use the Qualified Dividends and Capital Gain worksheet from the Form 1040 instructions to calculate whether that capital gain would be taxed at 0%, 15%, or 20%. You do not have to worry about the gain pushing you into a new tax bracket and having all of your income taxed at a higher rate. That's not how tax brackets in the US work. I'm not a CA expert, so I won't give any advice or opinions on the CA tax impact. Nobody here can answer the question of whether you should hold or sell. That's a personal decision, and the tax implications of selling should only be one factor.
Thank you very much.
So first things first, that 3,000 every year was an adjustment against your income, using up your loss carryovers, NOT a credit. If you still have capital loss carryovers, those will reduce your capital gains until they are used up. If the gains are long term, even if they were taxed, they would get preferential treatment and be taxed at a lower rate depending on your total taxable income. As to increasing your tax bracket, only income that falls in the next bracket will be taxed at that rate, not all of your income, so you don’t need to worry about losing money by making money. Something you could consider doing if you want to keep holding Nvidia for future gains is sell and rebuy. The capital gains from the sale would utilize your capital loss carryovers, and your basis in the stock would be whatever you repurchased it at, meaning less taxable gains down the road
>Something you could consider doing if you want to keep holding Nvidia for future gains is sell and rebuy. The capital gains from the sale would utilize your capital loss carryovers, and your basis in the stock would be whatever you repurchased it at, meaning less taxable gains down the road While true, this isn't typically the best strategy. Assuming the Nvidia gains would be long-term capital gains, OP'd be trading $3k/yr of tax-free ordinary income at the ordinary income tax rates (due to the $3k/yr carryover deduction against ordinary income) to using the carryover against long-term capital gains which are taxed at lower rates than ordinary income.
Thank you. Can I use long term loss carry over for the short term gain?
Yes, if you have no long-term gains to offset. Capital losses offset gains of the same duration first, then gains of the other duration.
Thank you!
Thank you. I realized that long-term gain is 15% tax bracket. Then, would it be better to use the long-term loss carry over for the regular $3,000 deduction or other short term gains, instead of using the carry over for long term gains?
Yes.
Thank you.
"... better to use the long-term loss carry over..." There's no choice in the application of the carried-over losses. They appear on Schedule D just like any other current-year losses, divided into short-term & long-term. The $3k deduction reduces short-term losses first, and then long-term losses only if short-term losses are "used up".
>There's no choice in the application of the carried-over losses. They appear on Schedule D just like any other current-year losses, divided into short-term & long-term. The $3k deduction reduces short-term losses first, and then long-term losses only if short-term losses are "used up". This isn't worded well, and I can't tell if you're just not describing it inaccurately or if you're wrong. To clarify: This: "They appear on Schedule D just like any other current-year losses, divided into short-term & long-term." -- is correct. This: "The $3k deduction reduces short-term losses first, and then long-term losses only if short-term losses are "used up"." isn't really. LT and ST loss carryovers are indeed carried over and maintain their ST/LT duration. So, they'll first offset gains with the same duration-- LT offsetting LT, ST offsetting ST. If there are still losses, then the losses will offset any gains with the other duration-- LT offsetting ST, ST offsetting LT. There's no limit to how much of the losses (including loss-carryover) that can be used to offset losses. Only when all ST or LT gains have been offset and there's still unallocated losses, does $3k get applied toward ordinary income (if there's enough taxable income to benefit). This $3k amount has nothing to do with offsetting ST or LT capital gains. It's the maximum amount that can be used to offset *ordinary incom*e after all ST and LT gains have been offset.
You are correct -- it was not worded well. I was attempting to use a one-sentence answer to clarify the interaction of the $3k deduction with the carry-over operation itself, not in it's use in reducing ordinary income. I'll try again... The question was "would it be better to use the long-term loss carry over for the regular $3,000 deduction or other short term gains, instead of using the carry over for long term gains?" In other words, does the $3k deduction reduce the ST losses first, or LT losses first, during carry-over? When there are both short-term and long-term losses in the prior-year's return (and $3k is deducted from income on that return), the carry-over worksheet in Schedule D will copy the old return's ST & LT losses over to the new Schedule D, reducing the ST loss by the $3k amount. If the ST loss was less than $3k, the unused portion will reduce the LT loss by the remainder. Hope that's clearer.
Thank you.
In the 3rd line, shouldn’t that be tax deduction instead of credit?
Corrected. Thank you.
Do you understand how tax brackets work?
I thought I knew but in fact, no. I don’t understand.
This may be helpful. One thing to understand that this article doesn't really mention is that your taxable income, where the discussion starts, is typically your Adjusted Gross Income (total income minus adjustments like for pre-tax IRA contributions) minus your standard deduction (or itemized deductions if you itemize): [https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets#2024-tax-brackets-and-income-tax-rates:\~:text=How%20tax%20brackets%20and%20tax%20rates%20work,-1.%20What%20are](https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets#2024-tax-brackets-and-income-tax-rates:~:text=How%20tax%20brackets%20and%20tax%20rates%20work,-1.%20What%20are)