Tax relief from capital losses: what do you actually receive?

A tax shield is a name for potential tax savings. In investing, eligible capital losses may offset qualifying gains under tax rules. It is not repayment of the entire investment loss.

Distinguish a falling market value from a realised loss. For an ordinary securities investment, a lower price while you still hold the asset does not by itself realise a loss for tax purposes. Recognition is generally examined on disposal, using proceeds, cost and applicable tax rules. An offset reduces the gain used to calculate tax; it does not put the lost capital back into your account. A financial loss can remain even after tax relief. Tax rate, income type, tax year, asset location and investor status matter. Do not assume every loss offsets every income category or salary. Under the Israeli capital-loss rules discussed here, current-year and carried-forward losses differ; carried-forward capital losses offset capital gains, not interest or dividends. Unused eligible losses may carry forward subject to conditions and reporting. Offsets between accounts or across years should not be assumed automatic. Certificates, withholding and returns need to be checked with an appropriate professional. This lesson does not recommend selling investments to create losses and is not a personal tax calculator.

Fictional same-year exercise: a realised gain of ILS 4,000 and realised loss of ILS 1,500, assumed eligible to offset each other. Net gain: 4,000 − 1,500 = 2,500. At an assumed teaching rate of 25%, tax before offset is 1,000 and afterwards 625. The tax saving is 375, not 1,500. This 25% is an exercise assumption, not a universal rate. If the gain were only 1,000 and the loss 1,500, no taxable gain remains in this exercise. The remaining 500 is not a cash grant; future use depends on the rules.

Using the same assumptions, calculate a gain of ILS 3,000, eligible loss of 1,000 and tax of 25%. List net gain, tax and tax saving separately. Use no personal account information.