How does the offsetting of capital gains work?
October 23, 2023 | 50,00 EUR | answered by Ralf Otten
Dear tax advisor,
My name is Gerd Volkmann and I am currently facing a challenge regarding my income tax return. In recent years, I have both generated capital gains and incurred losses on other capital investments. Now I am unsure about how exactly the offsetting of losses with capital gains works and how I should take this into account in my tax return.
Regarding the current situation: In recent years, I have received both dividends from stocks and interest from fixed-income securities. However, I have also suffered losses from the sale of securities. I would like to claim these losses to reduce my taxes, but I am unsure if and how this is possible.
My concern is that I may miss out on tax benefits if I do not correctly offset the losses. Therefore, it is very important for me to understand how the offset of losses with capital gains works exactly and how I should report this in my income tax return.
Could you please explain to me how I can account for losses from capital gains in my tax return and what steps I need to take? Are there any specific deadlines or requirements that I need to meet in order to correctly perform the offset of losses?
Thank you in advance for your support and expert advice.
Sincerely,
Gerd Volkmann
Dear Mr. Volkmann,
Thank you for your inquiry regarding offsetting losses on capital gains in your income tax return. I understand your concern and would like to explain in detail how you can claim your losses to reduce your taxes.
Offsetting losses on capital gains is an important aspect of the income tax return, as it allows you to offset losses from securities transactions with gains from other capital income. This can help reduce your tax burden and potentially provide tax benefits for you.
First and foremost, it is important to know that losses from capital investments can only be offset with gains from capital investments. This means that you cannot offset losses from the sale of securities with other types of income such as income from employment or rental income.
In your income tax return, you must indicate the offsetting of losses in the KAP annex. There, you can enter the losses from capital investments and offset them with the corresponding gains. It is important that you document and be able to prove all losses and gains from capital investments accurately, as the tax office may verify this information during an audit.
Regarding deadlines and requirements: Losses from capital investments can usually be carried forward indefinitely to offset them with future gains. However, there are certain deadlines to consider within which losses can be offset. Normally, losses can be carried back up to four years and carried forward indefinitely into the future. Therefore, it is important to declare and prove the losses in your income tax return in order to claim them for offsetting.
I hope this information has been helpful to you and that you can now correctly carry out the offsetting of losses on capital gains in your tax return. If you have any further questions or need assistance, I am at your disposal.
Sincerely,
Ralf Otten
