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Is there any upside in harvesting tax losses on long-term losses instead of short-term losses?

Personal Finance & Money Asked on August 23, 2021

Assume that one has the choice between taking long-term capital losses and short-term capital losses, and assume that, since the year hasn’t ended yet, one doesn’t know all the short-term and long-term capital gains.

Is there any upside in harvesting tax losses on long-term losses instead of short-term losses?

From https://www.moneyunder30.com/profit-from-tax-loss-harvesting:

Long-term losses are first applied against long-term gains, and then against short-term gains. Meanwhile, short-term losses are applied first to short-term gains. This sequence takes place because long-term capital gains are taxed at a lower tax rate than short-term capital gains.

Since taxes on short-term gains are higher than taxes on long-term gains, I only see upsides in tax-loss harvesting short-term losses instead of long-term losses. Did I miss something?

One Answer

If you have long-term gains, you will have to pay capital gains taxes on them. If you harvest long-term losses, you will reduce the amount of taxes you have to pay.

Correct answer by David Schwartz on August 23, 2021

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