Long / Short-Term Capital Gains / Losses

Can I deduct capital losses?

Yes, the IRS allows you to deduct capital losses. If in any one year your capital losses exceed your capital gains, the excess losses may be deducted on your tax return and used to adjust other income sources, such as wages, up to an annual limit of $3,000 per year, or $1,500 for couples who are married and filing separately. These deductions appear on IRS Schedule D, “Capital Gains and Losses,” and on Form 1040. The IRS is only concerned with the “net” gain or loss you may realize during the course of the year. For example, if you make $100 on one investment and lose $100 on another, your net gain or loss would be zero. No tax would have to be paid, nor could any loss be deducted. For real estate, you can only deduct capital losses on investment property, not on property categorized as personal or pleasure.


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