I am considering selling some mutual funds to harvest capital losses. The capital losses will be almost entirely long-term. I am trying to understand how I can use these losses in offsetting capital gains, dividends, and income. Below is my understanding of the ?offsetting? sequence:
- First, these losses must be used to offset any long-term gains.
- Remaining losses can be used to offset short-term gains.
- Remaining losses can be used to offset up to ,000 of income.
- Any remaining losses can be carried forward into future years.
In other words, the maximum benefit in any tax year is 100% of the capital gains (long and short), plus $3,000 of income (assuming the loss is at least $3,000 more than all capital gains).
Is the above information accurate?
Also, must I continue to track the losses carried forward as long-term or short-term and apply them as outlined above in future years?
It appears there is a worksheet related to capital losses and qualified dividends. Am I correct to assume the tax benefit of any qualified dividends will be diminished if the capital losses exceed the capital gains and I use them to offset income?
Are there other considerations?
Since almost all my losses are long-term, I am trying to verify it is worth the churn of realizing them.
sn