While the basics for capital gains apply to capital losses as well, there are a few special rules that apply to capital losses. First, you cannot deduct any losses that you incur as a result of selling your personal-use property. This means that any losses from the sale of your car or your house cannot be deducted.
In addition, the IRS places a $3,000 maximum loss deduction that you can take every year. This means that if you are doing your income taxes for the year and your capital losses are over $3,000 or your losses exceed your capital gains over $3,000, then you are limited to deducting just the $3,000 for that year’s tax return. Any remaining losses that could not be deducted can be carried forward to future tax years, but again at a $3,000 maximum deduction per year. Another thing to remember about the $3,000 deduction limit is that it is cut in half if your filing status is married filing separately.
When you have sold a capital asset and you are doing your own income taxes, you need to report the sale of your capital asset on Form 8949 of your federal tax return. Then, whatever gain or loss results from that form moves over to Schedule D of your federal tax return. If you or someone you know is having tax issues, you can contact us at Hoorfarlaw.com or 816-524-4949.