Set the tax rules your backtests use

Picking a residency re-seeds the regime and every rate to the values that jurisdiction uses; every residency starts on the Declarative regime:

Under United States and Other every rate is yours to change; under Italy the rates follow the law for the selected regime. Under Other the regime field is shown but the simulation taxes as under United States whichever regime you pick. A residency you have never saved follows your interface language: United States in English, Italy in Italian.

Because your saved residency does not fit your language and results currency. United States is flagged when you use Italian or read results in EUR, and Fincanva suggests Italy; Italy is flagged when you use English and read results in USD, and it suggests United States; Other is never flagged, because it is a deliberate choice of your own rates.

The warning on Simulation defaults reads Your tax residency is {residency}, says which of the two facts point elsewhere — for example "You read results in euros and use Italian: switch to Italian tax rules?" — and offers Switch to {residency}. That button saves nothing: it puts the suggested residency into Fiscal profile, whose rates re-seed, and the warning then reads You are switching it to {residency} below: confirm with Save. The same case appears on the settings Overview under Needs attention, with a Review button that opens Simulation defaults.

A realized loss is set against the gains you are taxed on, and what is left over carries forward with no time limit.

• A loss is first set against gains realized in the same year, whatever their character: a short-term loss can reduce a long-term gain, and a long-term loss a short-term gain.
• Whatever is left at the end of the year carries forward for as many years as the backtest runs.
• A carried loss keeps its short-term or long-term character: a carried short-term loss reduces short-term gains, a carried long-term loss reduces long-term gains, and it does not cross over.
• Fincanva does not model the annual deduction of net capital losses against ordinary income that US tax law allows: in a simulation a loss is only ever useful against capital gains.

A loss stays usable for five years, there is a single rate so no character to keep, and a gain on an ETF is never reduced by a loss. How the five years are counted follows the tax regime:

• Declarative — the year's losses are set against the same year's gains, and a net loss for the year can reduce net gains in the five years that follow.
• Administered — a loss reduces gains realized after it, in its own year and the four years that follow; a gain taxed before the loss happened is not revisited.

Why the Italian ETF rule matters to your results

A gain on an ETF cannot be reduced by any loss, same-year or carried, but a loss on an ETF reduces other gains. In a strategy built mainly of ETFs your losses help you and your gains do not: every ETF gain is taxed in full, so an all-ETF strategy gets no netting on the gains side even in a year of large losses. The rule applies to instruments Fincanva classifies as ETFs; ETNs, ETCs and closed-end funds are ordinary instruments whose gains carried losses can reduce.