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Can I offset taxes on real estate profits with stock losses?

September 6, 2012: 6:30 AM ET

I recently sold land for a profit. Can I take long-term losses from stocks that I sell this year to offset the long-term gains from the land sale? – Orva R.

As long as you owned the land for investment purposes, you can offset capital gains (in this case, from the sale of property) with capital losses (from stock sales). For instance, if you sold the property for a $10,000 profit and took a $5,000 loss on stocks, the amount subject to capital gains tax would be reduced to $5,000.

If your net capital losses are greater than your capital gains, you can also deduct the capital loss against ordinary income up to a limit of $3,000 a year, according to Edward Gormley, CEO of Susquehanna Financial Advisors in Mechanicsburg, Pa. If your capital loss is greater than $3,000, the excess carries over to the following year.

In order to qualify as long-term capital gains or losses, you need to have owned the asset for a year or more. If you've held them for less time than that, the federal government considers them short-term capital assets and taxes any gains at ordinary income tax rates instead of the 15% rate on long-term capital gains.

— Marc Mewshaw

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Posted in: Investing, Real Estate, Taxes
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