Well, unfortunately for us, we finally sold our residential building lot. We had bought the lot for $188K in March 2024 and sold it for $145K in June 2025. A loss of $43K. Florida is tough these days. So, my question is – Can I write this off on my taxes? If so, can you kindly tell me which forms I will need to use? And any other advice you may have. Thanks for your kind advice.
It will be written off as a capital loss on Form 8949. As a capital loss, it will offset capital gains. If you don’t have $43k in capital gains to offset, then up to $3k can be used to reduce your ordinary income. Any remaining loss will be carried over to next year, where it will again be used to offset capital gains and up to $3k in ordinary income. Lather, rinse, repeat until the losses are used up.
I would point out that unless you have total income that exceeds the 0% capital gains bracket ($96,700 + your standard deduction for MFJ), there isn’t really a tax benefit to offsetting long-term capital gains because they would have been taxed at 0% anyway. So, this year, you may want to sell enough stocks to bring your total income up to where you will have $43k more in capital gains than the 0% capital gains bracket to maximize the tax benefit of the loss. You can use this strategy to re-set the cost basis on investments that you intend to continue to hold for more than a year.
AJ
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AJ: you said:
“So, this year, you may want to sell enough stocks to bring your total income up to where you will have $43k more in capital gains than the 0% capital gains bracket to maximize the tax benefit of the loss. You can use this strategy to re-set the cost basis on investments that you intend to continue to hold for more than a year.”
That is great news. Just what I was hoping to hear. We have let our stocks grow for years and are finally retired, so will be selling a few shares every year to live off of. It was so much fun for me to learn investing at the Fool. Now, I must shift gears and figure out how to sell a little each year to live off of with as little capital gains as possible. Thanks for your response to my question. I appreciate it.
But the loss won’t provide you any tax benefit unless you actually realize enough capital gains for you to be over the 0% capital gains tax bracket.
Not necessarily - at least not this year, if you want to realize any benefit from your capital loss.
IIRC, you are both over 65. So in 2025 your standard deduction is the MFJ standard deduction of $30k plus an additional $1.6k each for being over 65, for a total of $33,200
As already mentioned, the MFJ capital gains 0% bracket for 2025 is $96,700. So you can have total income (ordinary income plus capital gains) up to $129,900 and not be taxed on any capital gains.
Unless your total income is more than $129,900, your capital loss is just going to offset capital gains that would already be taxed at 0%.
So, this year, with a $43k loss, to be offset, realizing enough capital gains to bring your total taxable income up to $129,900 + $43k, or $172,900 and you will still be taxed 0% on your capital gains.
If you only realize enough capital gains so that your taxable income is $169,900, then $3k of your ordinary income will be offset by the capital loss.
Now, this gets trickier because, IIRC, your other income is SS income, which is not fully taxable. So it’s not as simple as subtracting all your other income from $169,900 and aiming to realize that amount of capital gains. At this income level, 85% of your SS income will be taxable, so you would subtract 85% of your total SS income, plus any other income (interest, dividends, etc.) from $169,900 to get what your goal for realized capital gains is for this year. Then you would need to sell enough stocks to realize that amount of capital gains. Since you will be realizing gains, there’s no restrictions on buying the stock back immediately, so you can basically reset your cost basis. This will help you minimize capital gains in future years.
If you don’t understand these calculations enough to make them yourself, for your particular situation, you really need to consult a tax professional. I know you fired your CPA because you didn’t think you were getting any benefit from using him, but this type of situation is precisely what a CPA would help you with.
If you just go with your strategy of minimizing capital gains, you will be foregoing over $6k in tax benefits that you could realize unless your total taxable income with the minimum capital gains you realize is over $169,900.
Edited to add:
I will also point out that if all of your ordinary income is taxed in the 10% or 12% bracket, it would actually be more beneficial to offset capital gains in the 15% bracket, rather than use $3k of the loss to offset ordinary income. If that’s the case, then you should use $172,900 instead of $169,900 when calculating the amount of capital gains to realize.
I will also point out that the capital gains you realize in this strategy can be either short-term or long-term, because the loss will offset both type of capital gains.
AJ
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Thanks AJ. I really need some actual math calculations, so that really helped. You are correct, our only other income is SS and some small dividends and interest. What I try to do is sell some stock each year to then live off of. This coming year, we hope to remodel our pool, which might be $80-100K. (the old pool has to be removed). I learned from us buying our latest house (in 2024) with the sale of stocks, to possibly spread out our sales of stock into 2 years – so that is in the back of my mind. We had to pay income tax of $9000 for our 2024 income tax, because we sold stock to buy the house and had not been able to spread those sales into 2 different years and spread the capital gains into 2 years. ack. So, now I am trying to plan ahead, perhaps the sale of some stock this year, minus the pool renovations, minus our living expenses for 2 years, instead of one year, would work for me. That way I could capture the capital loss of $43k, and would have living expenses for 2 years. That would be more relaxing to me at least! What do you think?
That sounds like ‘replace our pool’ not ‘remodel our pool’. Personally, having owned two houses with pools, I found them to be a waste of money. But if you feel you use it regularly enough that it’s not a waste, then it’s your money to spend.
That sounds reasonable.
AJ
Yes. I would have said the same thing about having a pool before I had one. We use it every single day. We have an “Endless Pool” Fastlane – water treadmill. We cannot live without it. We are also in Florida where we swim 365 days a year. And yes, now that you mention it, it sounds like “replace” the pool, rather than “remodel it.” For sure. Thanks again.
You will need to refigure those calculations, now that seniors each get an extra $6k deduction.
AJ