Can Capital Losses offset Qualified Dividends?

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teaman
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Joined: Sat Apr 18, 2020 2:15 pm

Can Capital Losses offset Qualified Dividends?

Post by teaman »

If there are no capital gains, can capital losses be used to offset qualified dividends? From the Qualified Dividends worksheet it appears that could be done but I wanted to confirm.
tj
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Re: Can Capital Losses offset Qualified Dividends?

Post by tj »

teaman wrote: Tue Nov 23, 2021 8:42 pm If there are no capital gains, can capital losses be used to offset qualified dividends? From the Qualified Dividends worksheet it appears that could be done but I wanted to confirm.

Why would you want them to? Better to offset ordinary income.
fyre4ce
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Re: Can Capital Losses offset Qualified Dividends?

Post by fyre4ce »

I don't think so. Look at Line 3 of the Qualified Dividends and Capital Gains Worksheet. It says enter the smaller of line 15 or 16 from Schedule D, and if either line 15 or 16 is blank or a loss, enter -0-. Line 15 is net long-term gains, and Line 16 is net short-term and long-term gains. Capital losses can only offset other capital gains, not dividends, interest, etc. The only exception is that $3,000/year of capital losses can offset ordinary income.
livesoft
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Re: Can Capital Losses offset Qualified Dividends?

Post by livesoft »

tj wrote: Tue Nov 23, 2021 8:46 pm
teaman wrote: Tue Nov 23, 2021 8:42 pm If there are no capital gains, can capital losses be used to offset qualified dividends? From the Qualified Dividends worksheet it appears that could be done but I wanted to confirm.

Why would you want them to? Better to offset ordinary income.
Both qualified dividends and non-qualified dividends are ordinary income. But that up-to-$3000 net capital loss will be applied to non-dividend ordinary income first.
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Topic Author
teaman
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Joined: Sat Apr 18, 2020 2:15 pm

Re: Can Capital Losses offset Qualified Dividends?

Post by teaman »

I certainly would not want to offset my losses with qualified dividends first, but with ordinary income. I thought that the order of harvesting short term losses is:

1. STG
2. LTG
3. Qualified Dividends
4. Ordinary Dividends / Ordinary Income.

Is this not correct?
rossington
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Location: Florida

Re: Can Capital Losses offset Qualified Dividends?

Post by rossington »

teaman wrote: Tue Nov 23, 2021 9:42 pm I certainly would not want to offset my losses with qualified dividends first, but with ordinary income. I thought that the order of harvesting short term losses is:

1. STG
2. LTG
3. Qualified Dividends
4. Ordinary Dividends / Ordinary Income.

Is this not correct?
*Capital losses offset capital gains first.
*Otherwise if no cap gains you can use a max. of 3k in cap losses per year to offset ordinary income. Any additional losses leftover carryover.
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MrJedi
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Re: Can Capital Losses offset Qualified Dividends?

Post by MrJedi »

teaman wrote: Tue Nov 23, 2021 9:42 pm I certainly would not want to offset my losses with qualified dividends first, but with ordinary income. I thought that the order of harvesting short term losses is:

1. STG
2. LTG
3. Qualified Dividends
4. Ordinary Dividends / Ordinary Income.

Is this not correct?
You are mixing two different things up. Dividends are separate from capital gains/losses, see schedule D.

First capital losses will offset capital gains. (Short-short and long-long first, then each other).

After all capital gains/losses have been offset, if you are showing an overall capital loss, then up to $3000 can be used to deduct income. This up to $3000 deduction will apply to non-qualified income first and then qualified. The remainder of the capital loss will carryover to next year.
Topic Author
teaman
Posts: 107
Joined: Sat Apr 18, 2020 2:15 pm

Re: Can Capital Losses offset Qualified Dividends?

Post by teaman »

Understood. Thanks a lot everyone!

" In Qual Div & Cap Gains Worksheet, if either line 15 or 16 is blank or a loss, enter -0-."
I missed this part, and thought I need to enter a negative number for a loss in which case it would then offset Qual Div (if there are no cap gains).
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