If you've been following our series on surprising tax hits, you know that there is great value in choosing the right accountant to prepare your taxes. This week, we talk about one more money saving reason this is so important- the limited loss.
To demonstrate how the limited loss works, let's use an example:
If you sell stock, cryptocurrency or any other asset at a loss of, let's say $5,000, you can match this up with another asset you sell at a $5,000 gain and - presto! You won't have to pay taxes on that $5,000 gain because the $5,000 loss cancels it out.
While that seems pretty self explanatory, there is a very good reason for strategizing this way. If you don't have another asset that you sold at a gain, in this example, the most you could deduct on your tax return would be $3,000.
Herein lies the tax trap. If you have more than $3,000 in losses from selling assets, and you don't have a corresponding amount of gains from selling assets, you're limited to the $3,000 loss.
So if you have a big loss from selling an asset in 2022, and no large gains from selling other assets to use as an offset, you can only deduct $3,000 of your loss on your 2022 tax return.
Want to strategize your finances to get the most out of 2022's tax laws? Click here to schedule an appointment with one of Gold Standard's seasoned tax accountants.
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