Offsetting losses: how a losing trade lowers the tax
intermediate
Automated material · TradeAlmanac editorial deskPrepared by a language model from our stored data and checked by an editor.
A loss on one trade is not wasted: within a single tax base it reduces the gains on others.
What adds up
Within a year, gains and losses on exchange-traded securities are summed. Tax is computed on the total rather than on each profitable trade separately.
Different categories of instrument form different bases, and offsetting between them is restricted. The dividend base stands apart: it cannot be reduced by trading losses.
Carrying forward
A loss not covered by the current year's gains carries into future years. But unlike within-year offsetting it does not happen automatically: the carryforward is claimed in a tax return.
Several brokers
With accounts at different brokers, each computes tax only on its own operations. A gain at one and a loss at another combine only through a tax return.
This is among the most common overpayments: someone with two accounts pays tax on the gains at the first while holding a larger loss at the second.
Realising a loss at the year end
Selling losing positions before the year end to reduce the base is lawful and sensible. One caveat: the sale resets the holding period for long-term ownership relief, and for a long-held security the saving may be smaller than the loss of relief.
What to keep
Broker statements for the loss-making years: without them there is nothing to evidence the carryforward. Related: Investor income tax: what is taxed and when it is withheld.
Sources
- https://www.consultant.ru/document/cons_doc_LAW_28165/
Prepared by a language model from our stored data and checked by an editor.
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