Is there any tax difference between short-term vs long-term losses when selling investments?

Wait I'm confused. So if I have like $5,000 in short-term losses but no short-term gains, can I use that to offset my long-term gains? And what if I don't have any gains at all this year - just losses?

Yes, if you have $5,000 in short-term losses but no short-term gains, you can absolutely use those losses to offset your long-term gains. The IRS requires matching types first, but excess losses can cross over. If you don't have any gains at all, just losses, you can deduct up to $3,000 of those losses against your other income for the tax year (like your wages). Any remaining loss amount above $3,000 gets carried forward to future tax years. So with your $5,000 loss example and no gains, you'd deduct $3,000 this year and carry forward $2,000 to next year.

How exactly does this taxr.ai thing work? I've got a mess of trades this year and I'm worried about getting everything categorized correctly. Does it connect directly to my brokerage or do I need to upload statements?

Sounds interesting but I'm skeptical. Wouldn't TurboTax or another tax software handle this automatically? What makes this AI tool different or better for investment loss situations?

It works by analyzing your financial documents - you can upload your trade confirmations or brokerage statements and it extracts all the relevant information. It doesn't need to connect directly to your brokerage, which I preferred for security reasons. You can just upload PDFs of your statements. TurboTax will calculate things correctly if you input everything correctly, but what taxr.ai does differently is help you strategize BEFORE you make your final trades. It helped me understand which specific lots to sell for optimal tax treatment based on my overall financial picture, not just do the math after the fact. It's more about tax planning than just tax preparation.

How does this actually work? Do they just call the IRS for you? I'm confused about what the service actually does.

Yeah right. Nobody gets through to the IRS in 15 minutes. I've literally called dozens of times and the shortest wait was like 1.5 hours. This sounds like a scam.

They don't call for you - they use some kind of technology that holds your place in the IRS phone queue, and then calls you when they're about to connect you. So you don't have to sit on hold forever, you just get a call when an agent is actually available to talk to you. I was extremely skeptical too! I honestly didn't believe it would work. But after trying to get through for weeks about my loss carryover question, I figured it was worth a shot. I was shocked when I got the callback and was connected to an actual IRS person who could answer my specific questions about how to document my trading losses from different tax years.

Does that wash sale rule apply across different account types? Like if I sell something in my individual account at a loss, but then buy it in my IRA within 30 days, is that still considered a wash sale?

Yes, the wash sale rule definitely applies across different account types! The IRS considers all accounts you own when determining if a wash sale occurred. So if you sell a stock at a loss in your individual brokerage account and then buy it back within 30 days in your IRA, 401(k), or even your spouse's account, it's still considered a wash sale. This is one of those gotchas that people often miss. The rule is designed to prevent you from claiming artificial losses while maintaining essentially the same investment position. The IRS doesn't care which account you use to repurchase - they just don't want you claiming losses when you haven't truly exited the position.

I've heard about this 0% LTCG thing but wasn't sure if it was real. So if my total income including my regular job and everything else is under that threshold, I can actually sell stocks I've held over a year and pay no tax on the gain? That seems too good to be true.

Yes, it's absolutely real! The 0% long-term capital gains rate applies when your total taxable income (including the capital gains) stays within that bracket. So if you're single and your regular income plus the capital gains you realize keeps you under $44,625, you pay zero federal tax on those long-term gains. The key is "total taxable income" - so you need to calculate your regular income PLUS the gains to make sure you don't push yourself into the next bracket. It's a legitimate tax planning strategy that many people don't know about. Just make sure you're looking at taxable income, not gross income, since deductions can help keep you in that sweet spot.

This is really helpful! I'm in a similar situation where I have both short-term and long-term losers in my portfolio. One quick follow-up question - when you say "prioritize selling the short-term losers first if you also have short-term gains elsewhere," does that mean I should look at my entire portfolio across all my accounts to see if I have any short-term gains anywhere? Or just within the same brokerage account where I'm harvesting the losses? Also, for someone who's relatively new to tax loss harvesting, is there a good rule of thumb for how much in losses to realize in a given year, or should I just focus on staying under that $3,000 limit if I don't have gains to offset?

You should definitely look at your entire tax picture across all accounts when planning your loss harvesting strategy! The IRS doesn't care which brokerage account gains and losses come from - they all get reported together on your tax return. So if you have short-term gains in Account A and short-term losses in Account B, those will offset each other regardless of where they're held. For the loss harvesting amount, here's my approach: If you don't have gains to offset, I'd actually consider realizing MORE than the $3,000 annual limit if you have significant losses available. Why? Because unused losses carry forward indefinitely, and if you're in a higher tax bracket now than you expect to be in future years, you might want to maximize the current year's $3,000 deduction. Plus, having a bank of loss carryovers gives you flexibility for future years when you might have gains. The key is to avoid the wash sale rule - so make sure you have a plan for what to do with that money for at least 31 days if you want to buy back into similar positions. Some people buy similar but not identical investments (like switching from an S&P 500 ETF to a total market ETF) to maintain market exposure while avoiding wash sale issues.

This is exactly the kind of strategic thinking I needed! The point about short-term losers potentially being weaker investments makes a lot of sense - if they tanked in less than a year, that might be telling me something about my stock picking abilities with those particular choices. I'm definitely in the individual stocks category for most of my losers (learned that lesson the hard way), so your point about removing company-specific risk really resonates. I think I'll prioritize selling the short-term individual stock positions first and then maybe reinvest in some broad market ETFs after the wash sale period. One follow-up - when you mention documenting everything for tax time, should I be tracking this in a separate spreadsheet or do most brokerage platforms provide adequate records? I want to make sure I don't mess this up come April.

This spreadsheet approach is brilliant! I never thought about tracking the specific reasons for selling - that's going to be super helpful for learning from my mistakes. I'm definitely going to set up that watchlist too, because I know I'll be tempted to buy back in if I see one of these stocks suddenly recovering. Quick question on the specific tax lots - when you're selling "highest-cost shares first," is that something you have to specifically request with your brokerage, or do they automatically optimize for tax purposes? I've been just doing basic market sells without thinking about which specific shares I'm selling, so I'm wondering if I've been missing out on additional tax optimization. Also, thanks everyone for all the detailed responses! This thread has been way more helpful than anything I found on the official IRS website. I feel like I actually have a plan now instead of just randomly dumping stocks.