Short term vs long term losses on sale of stock

[vladtom]

I have some short term losses in the stock market and am thinking about the advantages of taking short term losses or should I wait a year and sell to take a long term loss?

[sweeps]

Don't let the tail wag the dog. Are your stock holdings solid long-term investments? Then hold on to them. If they're not, then sell them and buy something else. Tax considerations are secondary.

[safari]

For losses it doesn't matter whether they are short or long term. IRS allows you to deduct up to $3,000 in capital losses from your income every year.

[jIM_Ohio]

For losses it doesn't matter whether they are short or long term. IRS allows you to deduct up to $3,000 in capital losses from your income every year.

Agreed- if you have a loss and want to use it to offset gains, take the loss. That is a good way to make sure you have a good after tax return, which is the goal of investing in taxable accounts.

[humandraydel]

Personally I am a fan of tax loss harvesting for index funds. It's very easy to sell a Total Stock Market Index at a loss and then immediately buy the S&P500 index. After 31 days you can always switch back.

[sweeps]

OP, just to reiterate, only take the loss if you have lost confidence in the investment and don't think it will go back up. Let's say you take a $1000 loss on a $5000 investment and your effective tax rate is 15%. You saved yourself $150 in taxes. But if your $4,000 investment goes back up to $4,500, you would've made yourself $425 after taxes.

And of course don't buy things with the intent to use them as capital losses... it's as silly as taking out a mortgage just to get the mortgage interest deduction.

Finally, just a clarification when offsetting gains with losses, you must first match long-term gains with long-term losses and short-term gains with short-term losses. You can't apply a long-term loss to a short-term gain if you have other long-term gains you're claiming.

[vladtom]

Thanks,that was the answer I was looking for.