What Is a Capital Loss Tax Deduction? This capital loss tax deduction article has been revised with information for 2023-2024 tax years. While tax ramifications associated with selling investments often tend to be negative, selling them at a loss often seems catastrophic – however there may still be something positive hidden away: capital loss tax deductions!
When selling investments for a gain, the taxes due on them must be paid; when selling at a loss however, any losses can be deducted as capital loss tax deductions.
Capital losses don’t vary in tax rate as shown above; your deduction simply comes off your last earned dollars at your top marginal tax rate – providing significant tax relief and savings!
Let me give an example to show how this works: Say you invest $150 in Chatch & Sons Inc and later its CEO and founder Chatch McGee holds a press conference revealing inappropriate relationships with multiple interns resulting in births and lawsuits, the stock falls precipitously to $120 and it looks grim for Chatch & Sons’ future; so when faced with this decision to sell all shares for $12k less $1500 cost ($3K capital loss deduction), selling off gives proceeds of only $12,000. Consequently you incur a capital loss deduction deduction of $3,000 ($12k proceeds less original cost of $15,000 cost).
Your income falls well into the marginal 32% tax bracket. Presuming no other capital gains or losses were realized from selling stock, how much has selling saved in taxes paid?
+ There are no comments
Add yours