Although we are NOT CPA’s, we know enough about tax law to make strategic investments. Before making any financial decisions, you should always consult your team of professionals! When it comes to taxes and investments, understanding how passive losses and capital gains interact is key to building wealth. So, can passive losses offset capital gains? The answer depends on the type of capital gain.

1. Capital Gains from Stocks, Bonds, and Securities

When you sell stocks, bonds, or other securities, the income you get is considered "portfolio income." Even though these investments might seem passive, the tax code classifies them as non-passive. This means passive losses cannot offset gains from stocks or bonds.

2. Capital Gains from Syndicates, Funds, and Passive Investments

If you invest in syndicates, funds, or other similar activities as a limited partner, the IRS views these as passive investments. The good news is that passive losses can offset capital gains from these types of investments. You can also use suspended passive losses from earlier years to reduce the tax impact of these gains.

3. Capital Gains from Rental Properties

Rental properties are passive by default in the tax world. Because of this, current and suspended passive losses can offset capital gains when you sell rental properties. This includes any recapture of depreciation.

Understanding these distinctions can help you make smart tax decisions as you grow your investments and work toward building long-term wealth.

Why Investing with GWC Maximizes Passive Losses

At Generational Wealth Capital (GWC), we take full advantage of tax strategies like cost segregation studies on every investment. This approach accelerates depreciation, allowing for 100–130% depreciation of your investment. This means you can enjoy significant passive losses that help offset capital gains and protect your wealth. Investing with GWC not only grows your portfolio, but also keeps your tax liabilities low, making your path to wealth even smoother