If you lose money in the stock market, can/will it lower your taxes at the end of the year?

Question

I lost about four grand in the stock market this year and was wondering if I can claim that towards my income like medical bills or child day care?

I mean, I would have to claim any money I earned and cashed out on this years taxes, just wondering if it works the opposite way.

Thanks,
-Single Dad who F'ed up...

Answer 1

Yes, capital losses are deductible, but like many have said, only up to $3000 per year, with the rest carried over to subsequent years until exhausted. Also, the loss offsets any gains, and it's the net loss that's limited to $3000. If you also sold a stock and made $2000, your net loss is only $2000 (2000-4000), so you would be able to deduct all of it, in a sense.

But I just wanted to jump on the "realization" bandwagon that some have referred to. You must have truly lost the money. That is, if your account/stock value declined by $4000, that's not really a loss. It's only a loss if you actually sold the stock and "realized" such loss. Important distinction. No deduction for loss in value of your portfolio due to price fluctuations. That said, if you haven't sold the stock and want to claim the deduction, and don't expect it to rebound, sell it TODAY, as the market is open on the 31st. If you wait until after Jan 1, you'll have to wait until 2008 taxes.

Answer 2

You can claim a capital loss deduction of up to $3000 per year. The other $1000 would have to go for next year. I do not know about your situation, but keep in mind the wash sale rule when doing these deductions. A wash sale rule is an IRS rule prohibiting a taxpayer from claiming a loss on the sale of an investment when the same investment was purchased within 30 days before or after the sale date.

Hope that helps

Answer 3

If you realized the losses by selling the stock, yes you show it on a schedule D on your tax return, and you can take up to $3000 of the loss to offset other income. If your losses are more than $3000, the extra is carried over to next year.

Answer 4

You file a schedule d and show all gains offset by any losses to calculate your net gain or loss. Net gains are reported as income and taxed at the appropriate cap gains rate for you. However, only $3,000 of your net loss can be used per year. Any remaining net loss can be carried forward to future years until all used up.

Hope this helps

Answer 5

Did you sell the stock? Only realized losses go on the schedule D.

Answer 6

You have a profit or loss only when you sell a stock.
All the stocks sold are reported on schedule D (Form 1040). Finally from the sale of all the stocks in 2007, your total sum for profit and loss is a net profit or net loss figure.

If you have a net loss, you can deduct $3,000 loss against your other income. Loss more than $3,000 is carried over to the next year.