Capital loss offset

Capital loss offset
In taxation in the United States, capital gains are subject to capital gains tax. If a taxpayer has incurred capital losses in the same year as he has realized capital gains, he can offset the gains against the losses to reduce his taxable income. If the capital losses exceed the gains, up to $3,000 of the excess capital losses may be deducted against ordinary income (i.e., income other than capital gains) each year. If the taxpayer has a total net loss that is more than the $3,000 yearly limit on net capital loss deductions, the taxpayer can carry over the unused part to the next year and treat the loss as if it had been incurred during that next year.When a loss is carried over, it retains is character as long term or short term, as applicable. A long-term capital loss carried to the next tax year will reduce long-term capital gains (if any) actually realized during that year before being used to reduce that year's short-term capital gains (if any). If part of the loss is still unused, the taxpayer may carry it over to later years until it is completely used up, or until the death of the individual who incurred the loss.