If you have capital gains during the year, you can offset those gains with your capital losses. The maximum amount of excess losses you can claim on your federal income tax returns is $3,000 or the amount reported on line 16 of your 1040 Schedule D — Capital Gains and Losses, whichever amount is less. For example, you have a $5,000 capital gain for the year and a $10,000 capital loss. You offset your gains against your losses for a total loss reported on line 16 of your Schedule D of $5,000. You can only claim up to $3,000 of the total $5,000 as a loss.
The two types of IRS 1099 forms for which you can claim losses on are the 1099 A — Acquisition or Abandonment of Secured Property and 1099 B — Proceeds from Brokers and Barter Exchange. To claim a loss on a 1099 A, the property must not be one that you own exclusively for personal use such as a primary residence.
1099-A Loss Qualifications
An abandonment occurs when you stop making payments on the loan that secures the property, such as a mortgage and remove all of your belongings from the property. Examples of eligible properties you may claim as losses reported on a 1099 A include business and investment property. You cannot claim losses reported on a 1099 A for your main home or any property you own exclusively for personal use such as a vacation or secondary home.
Calculating the Loss
If the adjusted basis of the property is less than the outstanding debt remaining on the loan against the property, you can claim that amount as a loss on your 1040 Schedule D. For IRS purposes the adjusted basis is typically the fair market value of the property. If you held the property for one year or less before abandonment, you fill in the information reported on your 1099-A on Part I, Short-Term Capital Gains and Losses of the 1040 Schedule D. If you held it for longer than one year, you fill in Part II, Long-Term Capital Gains and Losses of the 1040 Schedule D.
The IRS requires investment brokers to report any proceeds that individual investors receive in the form of cash, stock or other property exchanged for stock on Form 1099-B. The broker provides a copy of this from to the IRS and to the individual investor. You may claim the losses reported on the 1099-B on your 1040 Schedule D, but if your broker checked Box 15 on the 1099-B, you cannot claim any losses. Losses incurred on assets held for one year or less go on Part I and those held for more than a year go on Part II on your Schedule D.