Can substantial short and long term capital losses be written off dollar for dollar against current year capital gains or are you restricted to only $3,000?

ANSWER

The BIDaWIZ Team's Answer:

Yes, prior year net capital losses may be applied dollar for dollar against current you capital gains. Any leftover losses can be applied to ordinary income up to $3,000. In terms of figuring out your net capital loss or gain, you need to first net your long-term capital gains (> than 1 yr investment) with the long-term losses and then your short-term gains (< than 1 yr investment) with your short-term losses. Then, if applicable, you can net the short-term gain or loss with the long-term gain or loss together to see if you have a net capital lossfor the year. Remember you can offset capital losses against gains in the current year and realize up to $3,000 in losses against ORDINARY Income (i.e. wages). If your loss exceeds the $3,000, the remaining is carried forward to future years as either a net short-term capitalloss and/or long-term loss depending on the character of the loss. This means that prior year short-term loss must first offset the current year short-term gain and the long-term loss must first offset the current year long-term gain.