Can I Deduct a Tax Loss for Selling My Stock?

Capital gain or loss from the sale of stock is determined by comparing the amount you sell it for to your basis in the stock. Gains from the sale are taxable; losses from the sale are deductible subject to limitations.

Basis

The basis of stock is generally the amount you paid for it, including commissions. This amount is then adjusted for certain items, such as non-dividend distributions and stock-splits.

Deductibe Capital Loss

If the capital losses exceed the capital gains for the year, you can deduct the losses up to the amount of the capital gain plus $3,000 ($1,500 if married filing separate). If the losses are more than this, the remainder is carried forward to the next year and treated as if it was incurred in that year.

Reporting Stock Sales

Capital gains and losses are reported on Form 1040 Schedule D, Capital Gains and Losses. (See Resources.) The gains and losses are separated as short-term (if you held the stock one year or less) or long-term (if you held the stock more than one year). The Schedule D amount is then transferred to the front of Form 1040 (line 13 for 2009).

References

• IRS: Top 402 -- Capital Gains and Losses
• IRS: 10 Facts About Capital Gains and Losses
• IRS: Reporting Capital Gains

Resources

• IRS: Publication 544, Sales and Other Dispositions of Assets
• IRS: Publication 550, Investment Income and Expenses (Including Capital Gains and Losses)
• IRS: Schedule D (Form 1040), Capital Gains and Losses
• IRS: 2009 Instructions for Schedule D