if you lose money on stocks, should you still pay taxes for that ?

Question

What if you keep hold on your stocks and they lose value ? but you don't sell them. what happenes then

if you buy stocks and keep them for years, should you pay taxes ? please address this clearly

Answer 1

No, you do not pay taxes on your losses. In fact you get to subract a portion from your earned income. If married $3000 a year. You can carry forward your excess losses for 3 years. It has only been this way for about 50 years. They never jacked up the loss amounts for inflation. Sort of sucks, but there you are. Of course if you do ever make money on your investments during the following 3 years, you can subtract your losses from those to the extent of your gains.

I quite imagine that there are some who lost so much during the 2001 dot.com melt down that they never did get to subtract the entire amount.

Answer 2

You can take a deduction for investment losses against any gains you have made, but only after you sell the stock and actually make the loss, silly! If you paid $100 for some stock, but now it's worth $20, until you actually sell it you haven't lost a cent!

If you bought a penny stock (anything under $5/share) and it dwindled away to nothing, your brokerage may buy it from you for a penny, then you can take the loss. Ask them!

Answer 3

First you have to sell the stock in question at a loss. Until you sell, you haven't realized any gains or losses. If you do that, you are eligible to claim that loss against other short-term or long-term gains in your portfolio, therefore saving on taxes. If you come out with a net loss overall, you are able to claim up to $3000 per year in short term or long term capital losses against your income until you use up all your loss. I believe there is more to it than 3 years, depending on the situation. But I'm not entirely sure.

Answer 4

On the 2nd question, if you buy stock and keep them for years, you have unrealized (since you haven't sold and gotten the money yet) gains. No taxes on that. Just taxes each year on the dividends (if any) distributed. Once you sell (for a profit) those unrealized gains turn into realized gains and that you pay capital gain taxes on.

Answer 5

If you buy and then sell for a loss, there is no tax due because you only pay taxes on gains. You can however use that loss on your taxes to offset other gains or income.