How to 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.

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.

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.

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

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

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

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


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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