Capital loss

{{Short description|Difference between a lower selling price and a higher purchase price}} {{Globalize|article|the United States|date=December 2010}}

'''Capital loss''' is the difference between a lower selling price and a higher purchase price or cost price of an eligible Capital asset, which typically represents a financial loss for the seller.<ref>{{cite book| last = O'Sullivan| first = Arthur| authorlink = Arthur O'Sullivan (economist)| first2 = Steven M.| last2 = Sheffrin| title = Economics: Principles in Action| publisher = Pearson Prentice Hall| year = 2003| location = Upper Saddle River, New Jersey 07458| pages = 283| isbn = 0-13-063085-3}}</ref><ref>{{cite web|url=http://www.investopedia.com/terms/c/capitalloss.asp|title=Capital Loss Definition|publisher=Investopedia}}</ref> This is distinct from losses from selling goods below cost, which is typically considered loss in business income.

==United States== The IRS states that "If your capital losses exceed your capital gains, the excess can be deducted on your tax return."{{citation needed|date=January 2009}} Limits on such deductions apply. For individuals, a net loss can be claimed as a tax deduction against ordinary income, up to $3,000 per year ($1,500 in the case of a married individual filing separately). Any remaining net loss can be carried over and applied against gains in future years. However, losses from the sale of personal property, including a residence, do not qualify for this treatment.<ref>See subsection (b) of {{usc|26|1212}}.</ref>

Special wash sale rules apply if the same or substantially similar asset is bought, acquired, or optioned within 30 days before or after the sale.<ref>[https://www.irs.gov/newsroom/article/0,,id=106799,00.html IRS TAX TIP 2009-35]</ref>

According to 26 U.S.C. §121, a capital loss on the sale of a primary residence is generally tax-exempt.{{citation needed|date=January 2009}}. IRC 165(c) is a stronger source that limits the loss on the sale of a personal residence. IRC 121 is for exclusion of gain of primary residence and does not talk about loss.<ref>{{Cite web |date=2002-10-01 |title=The Home Sale Gain Exclusion |url=https://www.journalofaccountancy.com/issues/2002/oct/thehomesalegainexclusion.html |access-date=2023-12-11 |website=Journal of Accountancy}}</ref>

==References== {{Reflist}}

{{DEFAULTSORT:Capital Loss}} Category:Pricing Category:Capital gains taxes Category:Tax terms