tax question capital losses?

Question

If a person invested 50k and it was now worth 25k, my understanding is they can write off only 3k of loss this year and carry over the loss from each year until it is gone.  Is that correct?  3k doesn't sound like much of a deduction at all or even worth fooling with.

Holding on to it for a year or longer makes it longterm.  I have had it about 9 months and still holding but have about a 25k loss so far.

Death and Taxes · Accepted Answer

No that is not correct.  If you invested 50k and it's now worth 25k your loss is 0.  Your gain is also 0.  You only realize taxable gains and losses when the investment is sold.  

If you were to sell today then yes, you would realize a 25k loss and would be allowed to take a 3k deduction in the current year and carry it forward until you used it up 3k per year or had gains you could offset against the loss.

Judy · Answer

Yes, that's correct assuming you don't have any investment gains to offset part of it.  It's $3000 of your NET capital loss that's the limit to use each year.  If you had, say, a $15,000 cg on another investment on your schedule D, the loss would wipe out any tax on that, and leave you with a $10K net loss - you'd use $3000 of that for the current year, and carry over the other $7000 to the next year.

StephenWeinstein · Answer

For each year, it is $3000 plus the amount of capital gains.  For example, if you have $10,000 in capital gains from some other investment one year, then you can write off $13,000 of the loss that year ($10,000 against the gains and $3000 against other income).

tro · Answer

you report the loss on Sch D when you sell it, or it is declared completely worthless
the reduction in value is not a loss you can report

tax question capital losses?

4 Answers