how do taxes work when you have losses in the stock market?

Answer 1

I remember a gasp I made when opening up a brokerage statement several years ago, when I had started traded again. The brokerage had merely reported to the IRS, by way of that form I had a copy of, how much I received in stock trades. I called my tax preparer and almost shrieked about how that was going to affect my taxes that year. "Relax, you simply tell me what the basis value was--what you paid for those stocks." When I then tallied up the purchases, then the reality struck, "[myself], you may have made money this first year, but you didn't make enough that you need to be afraid of the IRS." Several decades earlier, the tax laws were different, the IRS wanted to know what the value of my holdings were at year's end. That was one of the reasons why I stopped trading stocks back then, the IRS wanted money from me whether I had realized any gains or not. Today, however, the key (usually, Treasury Inflation Protected bonds, or TIPS, are different), the IRS is more interested in taxing you on realized gains. BTW, if you are hoping to take a tax loss for a trade, but you got back in before 30 days, something new day traders often get snagged on (although I am not a daytrader)--those are not deductible losses, per se.

Answer 2

Stock market losses (capital loss) can offset your regular income, up to a point. You can also use the losses to offset capital gains (like making money on another stock).

From the IRS web site: "If your capital losses exceed your capital gains, the amount of the excess loss that can be claimed is limited to $3,000, or $1,500 if you are married filing separately. If your net capital loss is more than this limit, you can carry the loss forward to later years. "

So lets say you make $100k per year at your job, made $10k in gains from AAPL stock, and lost $20k in YHOO stock. You use the $20k loss to completely offset your $10k gain, and you can further claim a $3k loss against your salary. So your reported income would be $97k, with $17k carried over to future years. If you make $17k in stock gains next year, you can use the carryover loss to completely wipe it out.

Answer 3

When you sell the stock, you report the amount for which you sold it and your basis (generally, the amount for which you purchased it) on Schedule D. You total the gains and losses. If you have both, the losses reduce the amount of gain on which you pay tax. If you have more in losses than in gains, then the first $3000? (this figure may have changed) of losses per year reduce the amount of income on which you have to pay tax and the rest of the losses rollover to the next year.

Answer 4

I am not a tax adviser etc., but short term and long term loses in the stock market are deductible against income, as long as your adjusted income falls withing the IRS guidelines. Best advice, see a good accountant.

Answer 5

This real simple

non profit = no capital gain= no tax !

Answer 6

there are different forms you need to file, to be on the safe side go to the tax preparer.

Answer 7

It depends in which country you live doll.