Yes, our tax laws are pretty complicated, and when it comes to investments it makes a difference between What is recognized as capital gains and what is recognized as income.
Capital gain losses are limited to $3000 per year, I think, and the rest has to be carried over.
This is particularly an issue if a company gives you RSU stock grants and ESPP stock plan. For RSU stocks, when your RSU stocks vest, the fair market value of those vested shares is considered “ordinary income” and you will owe taxes that year. So for example if 1000 RSU shares best at $100/share that day, you will pay ordinary income taxes on $100k. If you sell the RSU stock , the proceeds from that stock sale is capital gain or los, with the cost basis being $100/share. So for example, if you sell the RSU a month later, if the stock price is $90, you have a capital loss of $10k, of which only -$3000 goes on this year tax and the remaining -$7000 you carry over to next year. The IRS wants its money now from your vesting , and they limit what you can report as a loss to offset income to $3000.
For that reason, when it comes to RSU or ESPP shares, I usually just do a same day sale. If your company does well, your invested shares and future ESPP shares will more than compensate you. And if your company doesn’t do well, there’s no point in keeping so many shares and wealth transfering your money to the CEOs that do regular time sales of their shares.
