Writing off losses on stock on income tax?

Question

What are the rules of selling stocks at a loss? Can you claim the loss on income tax? If so how much can you write off?

Answer 1

3eleven and urbanbull are the only right answers so far. I am amazed that a CPA got this one wrong...in fact...I am guessing the CPA just misread your question because this is actually a pretty simple issue, and CPAs deal with some pretty complex stuff.
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$3000 in losses can be applied to your income, anything after that gets rolled into future years.

Unlimited amounts of losses can be applied towards gains.

It is very straight forward....

Answer 2

From what I remember, you can sell at a loss whenever you want, but as far as tax purposes, those losses can only be used to offset gains. You cannot take losses and then look to get a deduction/reduction of your tax liability. What you can do is take a gain, and then take a loss to offset the gain so you do not have to pay taxes on the gain (if they net out).

Examples:
Take a $1000 loss selling a stock.
Tax Result: None

Take a $1000 gain on selling a stock
Tax Result: Pay taxes on the $1000 gain according to current tax laws.

Take a $1000 gain on selling 1 stock and a $750 loss selling another
Tax Result: The $750 loss will reduce your gain (what you owe tax on) to $250.

Please re-check this with the IRS...IRS.gov is the website.

Answer 3

If you have actually sold the stock at a loss, you can write off up to $3000 of loss against other income. If your loss is more than that, you can carry the rest over to next year. If the stocks just went down, but you didn't sell them, there is no deduction.

Answer 4

If you sell your stock at a loss, the net loss is applied to your overall income -- it decreases your taxable income, but isn't otherwise applied to your actual return (otherwise, it would be like expecting the government to pay you a lot of money because a company you invested in went belly-up).

Answer 5

Generally, yes, you can write off your losses. But the laws on capital gains and losses are quite complex. I recommend using TaxCut or Turbotax to figure your taxes. The program will ask you about all stock or fund sales, and you can report the info there. The program will figure your tax writeoff, if there is one.

Answer 6

Losses can only be used to offset gains. If you have gains then you net the two and only report that amount of gains.

If you don't have any gains then you must carry it over to a future tax return in which you do have gains.

Answer 7

Agree with Thrasher, but you can take $3,000 worth of the capital loss against income per year.

Answer 8

If you sold stock for a capital gain you can deduct any losses from that.

if you didn't have any capital gains you can still write some of the losses off of your regular income.

you can write off up to $3,000 per year from your income for capital losses. Anything over $3,000 has to be carried over.

Example 1

you earn $30,000, have $10,000 in capital gains and $9,000 in capital losses.

you pay income tax on your 30,000 and capital gains tax on $1,000 (10,000 - 1,000)

Example 2

You earn $30,000, have gains of $5,000 and losses of 6,000.

You pay income tax $29,000 and no capital gains taxes (5,000 in capital gains is offset by 5,000 in losses and 1,000 is deducted from income.

Example 3

you have income of $30,000, capital gains of $0 and capital losses of $5,000

You pay income tax on $27,000 and carry the renmaining $2,000 in losses over to the next year.