capital loss from stock reducing income

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ketanco
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Joined: Wed Jul 24, 2013 7:09 pm

capital loss from stock reducing income

Post by ketanco » Thu Nov 08, 2018 10:48 am

if i sell a stock now and realize a long term loss from it, (and i will not have any other capital gains or losses), will this amount reduce my overall income or taxable income? if overall income, and if it is more than my whole income, what happens? net operating loss? does it make a difference if my income (before this sale) is below 10K for the year and in that case my taxable income would be zero in the first place so there is nothing to reduce and this loss would carry forward as a capital loss?

PFInterest
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Re: capital loss from stock reducing income

Post by PFInterest » Thu Nov 08, 2018 11:00 am

you only get 3K off income/year. the rest carries over.

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cheese_breath
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Re: capital loss from stock reducing income

Post by cheese_breath » Thu Nov 08, 2018 11:11 am

ketanco wrote:
Thu Nov 08, 2018 10:48 am
does it make a difference if my income (before this sale) is below 10K for the year and in that case my taxable income would be zero in the first place so there is nothing to reduce and this loss would carry forward as a capital loss?
"Unfortunately, the IRS will not allow you to skip a year. Even if it would be more advantageous to hold on to it and use it next year, you are still required to reduce the amount by $3,000 each year."

https://ttlc.intuit.com/questions/29713 ... -i-do-this

So I guess this means your 10K income would be reduced to 7K.
The surest way to know the future is when it becomes the past.

kaneohe
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Re: capital loss from stock reducing income

Post by kaneohe » Thu Nov 08, 2018 1:57 pm

You must use your capital loss each yr. If you don't have capital gains to offset it, then up to 3K offsets ordinary income. This would reduce your AGI. If your income is low enough as you point out, the std deduction might have reduced your taxable income to zero even w/o the capital loss.

However just because you used the capital loss does not mean you have lost it. You need to go to the worksheet
to find out how much carries over to the next year. In some cases, even though you used it, all of it may carryover to the next year. In other cases some or none of the amount used will carryover. https://apps.irs.gov/app/vita/content/g ... ksheet.pdf

You'll have to work thru the wksht to be sure but I seem to recall that if your AGI less deduction is < 0, you will not lose the loss used. At least that's how it worked before the tax law changed so I guess you should find the 2018 worksheet to be sure things work the same way. See p. D11 here https://www.irs.gov/pub/irs-dft/i1040sd--dft.pdf make appropriate changes to the year referenced on form
.

ketanco
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Re: capital loss from stock reducing income

Post by ketanco » Fri Nov 09, 2018 4:43 am

i did the worksheet thanks. and no matter it carries over or not, also i think capital losses do not cause any NOL in any situation as per the link that i just found: https://www.irs.gov/publications/p536

kaneohe
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Re: capital loss from stock reducing income

Post by kaneohe » Fri Nov 09, 2018 7:43 am

ketanco wrote:
Fri Nov 09, 2018 4:43 am
i did the worksheet thanks. and no matter it carries over or not,.............................................
Not sure what you mean above. Could you elaborate?

In the normal use of the wksht (when there is "normal" income) as an example:
1) You have 10K capital loss; if you have no cap gains, you use 3K of the loss this yr , and "lose" all of it so
7K is carried over to next yr.

However is income is low , if you have no cap gains, you are still forced to "use" 3K of the loss this yr. However
you should find from the wksht, when income is very low, that 10K is carried over to next yr......that is the 3K
"used" this yr is not lost and is also carried to next yr in addition to the "normal" 7K expected.

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