I've been trading pretty actively for 3 months now: buying then selling stocks in short time frames from 1 day to 1 month. Most trades I've done so far have been for gains. Three trades have been for losses totaling about $400. I'm wondering about taxation for next year. I keep reading different things online about whether I can deduct my losses or not? Also I use TD Ameritrade, and it gives you different tax id methods on sales (FIFO, LIFO, Highest Cost, Lowest Cost, Tax Efficient Loss Harvester), but I don't know what I should be doing there yet, so I just leave it at their default setting. Any advice is much appreciated, thanks.
Profits from.stock sales.are.a.capital gain. There is a difference between stocks held less.than a year, and longer than a year. You can deduct losses up to amount in gains.
Thanks! I heard losses couldn't be claimed and also heard they can but only up to $3000 fo individuals? And over/under year difference is over they get taxed as capital gains, under taxed as income, or is that not so?
You can deduct short term capital losses against short term capital gains up to the amount that you have gains plus an additional $3000. You can also net long term gains/losses against short term gains/losses but you always net short term against short term and long term against long term before you net short/long. Also, if you have been trading the same stocks repeatedly and have a loss but bought the stock again within 30 days you will have a wash sale and you will not be able to deduct the loss. FIFO, LIFO, etc are different ways to account for the sale. FIFO is first in fist out (meaning the first security you bought is considered the first you sold). LIFO is last in first out (meaning the most recent stock you bought is considered the stock you sold). If you bought and sold all of them at the same time it won’t matter. This changes things If you bought multiple lots of stocks and sold only a portion of your stock.
Play the market. Make some money. Pay a tax professional. Not H&R Block or Jackson Hewitt. Find a good tax guy, or pay more for a tax attorney.
Well, if you wanna write off some losses, you better be very careful. In fact, not doing it right might bring you a lot of trouble. My suggestion is that you don't sell a stock just to get the tax break. Also, may I ask where do you reside? It varies from country to country, but if you live in the U.S., I could share with you an article about it, if you wish. By the way, regarding taxes, I highly advise you to keep track of the ones you've paid and the ones you want to disregard.
