How to Offset Capital Gains With Capital Losses

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How to Offset Capital Gains With Capital Losses
Offset Capital Gains With Capital Losses

A capital gain is the difference between money you make from a sale and the original amount for which you purchased it. Capitol gains occur when you sell an capital asset, such as real estate, stocks or bonds, and make a profit. However, when you sell a capital asset at a loss, it's called a capital loss. When you have capital gains, you must pay taxes on your income.

Skill level:


  1. 1

    Consider selling stocks or land that you feel you won't make you a profit, and replace them with ones that will increase in value. These losses will help offset your gains.

  2. 2

    Selling those bad stock picks the year before can help offset the profit from selling your house the year after. Also, add closing costs and added-value home improvement costs to the basic cost of your home.

  3. 3

    Offset capital gains that were held less than a year by using your current capital losses. These are taxed at your regular tax rate.

  4. 4

    Use the remaining losses to offset the gains that were held more than a year. These are eligible for a discounted tax rate.

  5. 5

    Discount the additional capital gains that are left by discounting them by 50 percent.

  6. 6

    Carry your capital losses over to the next year for offsetting if they are more the gains for the year.

Tips and warnings

  • Consult a tax expert for details on capital gains and losses.
  • It's legal to offset your capital gains with your capital losses dollar for dollar.
  • To learn more, read the IRS Publication 523.

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