Can someone spell out the best strategy for balancing short and long term gains from one year to the?  As I understand it, I want to offset and short term gains with short term losses and the same for long term gains/ losses.

Any short term gains that are not balanced off get taxed at current income rate instead of long term gain rate.  Any short term losses get converted into long term lossses that carry forward.  Am I on track? Any tricks?

I’m not sure what your question is.  If you have the option take long term profits rather than short term to pay lower taxes.  

Losses are losses, doesn’t matter how long you held the losing security.  You can write off up to $3k in losses per year and losses above $3k are carried over to next year.  

I wouldn’t want to offset gains with losses, that means you made nothing!  Avoid the losses in the first place, pay the taxes on your gains, and profit?

I think you may be referring to Tax Loss Harvesting ?

We have our CPA do our Income Taxes each year.  The  Tax  Loss  Harvesting  exercise is just part of the process each year.  We send all the information  from our Bank  and Fidelity to our CPA  for  them to do what CPA's do.
Standard stuff for them.

Before  retirement, I foolishly thought that I would be  able  to  do our Income  Taxes once I got done with International work....

I  was very  wrong and we need a CPA to work with -  it's a good problem to have.... I guess.

Recommend you get a  good CPA.  

True story, last year - IRS sent  us a  notice / Fine saying we had to send them low 5 figures payment / fine in less than  ~10 Business  Days from time we received  the notice in Snail Mail.
Immediately  engaged CPA  who provided all documentation to IRS - there was no problem and  the IRS had made a mistake.  
What impressed me  was  how rude the IRS was.  

Just sell something you're down on by $3k. I did about a month ago to offset gains on various trades I've made over the year that netted WAY over that. I'll still owe, but I'm taking that $3k deduction where I can🤷‍♂️

You basically got it. Short term losses can offset short term gain 1/1. They can offset standard earned income up to $3k per year but additional losses over that can be carried forward.

There is a whole ordering rules regarding how short term and long term losses can offset short term and long term gains. I’d suggest you look it up from the IRS website.

True story from last year.  Got a bill from IRS for 48k for a stock I bought and sold within a few months.  My tax guy is my buddy who does taxes so he and I put together a response detailing exactly with numbered line items where they made a mistake.  First time got kicked back with no changes at the last day they had to address it, sent in the same stuff and same result the second time, same result.  The third time they accepted our explanation and I ended up with a check for 3400 for taxes I overpaid half a year after the first nastygram from the IRS.  So ya Turbotax sucks and I now have a tax guy.

This process primarily makes sense when dealing with mutual funds/ETF's. You can sell off a Fidelity fund and purchase a similar Vanguard fund. This is assuming you want to keep your portfolio similarly allocated and have a loss you can harvest.

The big question is why are we still limited to 3k a year in losses? Adjusted for inflation from 1978 it should be over 14k now.

I agree.  $3k is way too low these days.

So basically..  if I have short term losses they will become long term losses unless balanced with short term gains which can be carried forward to offset future long term gains.  Long term losses can only be burned up against income at a limit of 3k per year.  

So, if I have short term gains, sell short term losses to minimize taxes.   If I have a net short term loss, look for unrealized short term gains to sell to take advantage of short term vs long term tax rates.


I got that right?

I’m still confused about what your end goal is.  

If you balance gains and losses then you’ll have no gains - if that is your goal why are you in the markets?

Markets are at 1-year highs and at or nearly at all-time highs so how can you even have any losses significant enough to worry about?  

The best tax treatment of gains since short term gains are taxed at a higher rate.  I'm sitting on a few grand of short term losses right now due to hedging and I think that I want to scan for positions with short term gains to sell to offset instead of letting the short term losses roll in to long term loses.  That make sense?  This is my first year with short term losses from hedging so it's the first time I have had to think about it.  The underlying positions that were being hedged are up a lot but remain unrealized gains since I have not sold them yet so I spent more covering my shorts than I made off premiums which is unusual.  The saving grace is the underlying positions are up much more than I spent covering.

So you’re looking to liquidate something at a profit since it’s “free” (because you have losses elsewhere) and would prefer to take short term capital gains for “free” rather than long term?  I understand that, but…

Stupid question time, help me out here:
Assume you’ve already taken the $3k loss and you’re in the 32% bracket, so you get a $3k deduction on your income and avoid $960 in taxes.  
If you now sell $3k of short term gains then you’ll add $3k to your income and pay $960 in taxes on it.  
The $960 taxes offset each other for no net change, which is what you are attempting to do now, correct?  

Why isn’t it better to keep the gains and sell them next year as long term gains?  For argument purposes assume you’re in the same tax bracket and the position you sell for a profit doesn’t change in value.  You’d pay 22% (or whatever long term gains less than 32%) on that $3k profit next year rather than 32% short term gains this year, correct?  

You got it

The $3K limit only applies to offsetting income.

You can offset any amount of gains with appropriate losses

So if you have $600K of short term realized gains you can avoid paying all short term taxes by offsetting them with $600K of short term losses.

There really isn't a strategy for Tax Loss Harvesting. It just sort of happens.

For example, years ago I purchased a position in a company Arrival, which was supposed to be the new contractor for the electric USPS truck fleet. There are thousands of trucks to be replaced so it would have been lucrative. However due to some purchase bidding lawsuit, the contract was void making my investment an 80% loss. I didn't plan to purchase Arrival for a loss. It just happened. So the decision is whether or not to sell it in 2020 or move it to 2021.

Also in 2020 I sold off some stocks and made significant gains.

The gains and the losses were both independent deals that I could combine to lower my total gains.