Stock capital gain vs loss?

Question

How come when we have a capital stock gain we get taxed on the entire amount in one year but when we have a capital loss we can only claim $3000/year and carry the rest over to following years?

Answer 1

You offset losses against any gains in the tax year, and if your losses are more than your gains you can claim up to the $3,000 in excess losses ($1,500 if married filing separately). That's the way that congress has passed the rules. Some states are even worse as to how they treat stock losses. PA won't let you deduct stock losses, and you can't even carry them forwards. MA doesn't let you deduct stock losses, but does let you offset up to 2,000 against non-Mass bank interest, and dividends.

Answer 2

Since capial gains are taxed at a different rate from orginary income, I think it's about not giving too much credit for the losses.

You can claim your capital loss against any capital gain. You are just allowed to claim an EXTRA $3000 over any capital gains.

So, if you have a $50,000 capital loss carrover from the previous year, and this year, you make $30,000 in capital gains, you would owe taxes on $0 of capital gains, and be able to write-off an additional $3,000 of ordinary income (and have $17,000 of capital gains to carry-forward for another year.

I hope that helps.

Answer 3

Because that's the way the law is written. But at least you can carry it over on the federal return. On PA state returns, you not only don't get a carryover, you can't even claim a net capital loss for the year when it occurred, but do have to claim a net capital gain.

Answer 4

It's calledthe tax law. You can claim those losses against capital gains in future years. this is why you need to hire a tax person to help you plan it so it doesn't seem so bad.

Answer 5

It depends. Rental property is considered a passive investment. As such, you can usually (see exception below) only deduct losses against other rental property income. Rental losses cannot be deducted against salary, dividends or interest. But current losses may be carried forward to offset against future gains, including the gain on the sale of the rental property. BUT if you have an adjusted gross income of $100,000 or less, you may be eligible to deduct up to $25K of your passive loss against ordinary income and/or other investment income.

Answer 6

Because they are trying to be consistent with the rest of the tax code in the sense that all of it is illogical.

Answer 7

Congress = jerks.