What is the limit for capital losses?

February 9, 2005

Subject:  Question - selling upside down stocks a limit
Date:  Fri, 28 Jan 2005
From:  Craig

Question:

I have 3 stock investments held long-term that I sold during 2004. I had tax losses as follows: Stock A, $2,160; Stock B, $2,462; Stock C $9,933. When I entered the loss for Stock C in my tax return preparation software, the taxable income and federal tax refund didn't change. Why?

Thanks,
Craig

Answer

Date:  Mon, 31 Jan 2005

Hello Craig,

Because the maximum capital losses that may be deducted in any tax year on an individual's federal income tax return is limited to $3,000. Excess capital losses are carried over to the next year. See line 21 of Schedule D.

If you are going to be an investor, you need to learn the rules of the game. At least read the section on capital gains and losses in a good tax guide. Your stock broker might also have some booklets on tax rules relating to investments that you can study.

Good luck!
Mike Gray

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