What is the Limit on Capital Loss That I Can Claim in One Year?
When you incur capital losses from the sale of investments or other capital assets, you may deduct these losses against your capital gains and, in some cases, against your ordinary income. However, there is a limit on how much capital loss you can claim in a single tax year.
Annual Capital Loss Deduction Limit
- You can deduct capital losses up to the amount of your capital gains plus $3,000 ($1,500 if married filing separately).
- If your net capital loss exceeds this limit, the excess amount can be carried forward to future tax years.
- The carryover is unlimited in duration and can be used to offset future capital gains or up to $3,000 of ordinary income each year.
Reporting Capital Losses
- Report all capital gains and losses on Schedule D (Form 1040), Capital Gains and Losses.
- Use Form 8949 to list individual transactions and then summarize them on Schedule D.
- For losses from partnerships, estates, or trusts, report the net short-term or long-term capital gain/loss on Form 8949 based on information from Schedule K-1 (Form 1065 or Form 1041).
Carryover of Excess Capital Losses
- Any capital loss exceeding the $3,000 annual limit (or $1,500 for married filing separately) is carried forward to future years.
- To calculate the carryover, use the Capital Loss Carryover Worksheet in Publication 550, Investment Income and Expenses (Including Capital Gains and Losses).
- OLT (Online Taxes) software automatically calculates this limit and creates a carryover worksheet when applicable.
Important Notes
- Capital losses are categorized as short-term (held 1 year or less) or long-term (held more than 1 year).
- Short-term losses are reported on Part I of Form 8949 and Schedule D, line 5.
- Long-term losses are reported on Part II of Form 8949 and Schedule D, line 12.
Source:
Schedule D (Form 1040)
Form 8949
Publication 550
Schedule K-1 (1120-S)
IRS Forms, Instructions, and Publications
Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.