Are short-term capital losses tax deductible

Tax implications of capital losses on equity investments

Ever think that you are falling in the value of your stock investments, which could be a good thing? Perhaps the only real positive loss in terms of your portfolio is that it can lower your taxes. A Capitalloss means that you have lost money on your investments.

This amount is generally deductible on your tax return, and you can claim long-term or short-term stock holdings on either a loss. This loss can go against other income and lower your overall tax.

Please tell Worth Zilch Co. stock for a total purchase price of $ 3500 and later sold it purchased for a sale price of $ 800. Your tax deductible capital loss is $ 2,700.

The one string attached to the investment loss deduction on your tax return is that the most that you can report in a single year is $ 3,000. On the bright side, though, excess loss isn't actually lost - it can carry it forward to the next year.

Before you can deduct losses, all capital gains must first be balanced. If you realize long-term capital gains of $ 7,000 in Stock A and long-term capital losses of $ 6,000 in Stock B, then you have a net long-term capital gain of $ 1,000 ($ 7,000 profit minus the offset of $ 6,000 loss).

Whenever possible, see if losses can be realized in your portfolio to offset capital gains to reduce potential tax. IRS Publication 550 contains information for investors on capital gains and losses.

Here is your optimal strategy: Where possible, hold losses on a short-term basis and push your profits into long-term capital gains status. If a transaction can't be tax free, at least try to move the tax off to keep your money working for you.