Capital Loss

Definition

  • When you sell an asset for less than you paid for it, or less than its adjusted basis, you have a capital loss. While it's never fun to lose money, when it comes to taxes a capital loss isn't necessarily all bad. You can reduce the amount of income that will be taxed by the amount of your loss, up to $3,000 per year. If your loss is more than that, you can carry the excess, known as capital loss carryover, forward indefinitely until the total loss is used.

Synonyms
devalue, reduced worth, depreciate

Alternate Spellings
Capital Loss

Related Terms and Acronyms

  • Adjusted Basis Definition,
    • The amount you use to determine your profit or loss from a sale or exchange of property.
  • Basis Definition,
    • That on which a thing rests or is founded.
    • Relating to cost basis, this is the amount assigned to an asset from which a taxpayer determines capital gain or loss. For assets purchased, the basis is the price paid. Special rules apply to assets acquired through gift or inheritance, as well as to the value of stock funds held for a period during which earnings are reinvested.
  • Capital Definition,
    • Money that is used to make money; for example, to buy rental property or a business.
  • Capital Assets Definition,
    • Items that you own for investment or personal purposes, such as stocks, bonds or stamp collections. When you sell a capital asset, depending on the price you earn a capital gain or a capital loss. Gains are taxed at a special rate, and losses can be used in many cases to reduce the amount that is taxed. See also "Capital Gain" or "Capital Loss."
  • Capital Gain (CG) Acronym, Important,
    • The profit made by the seller when real estate or other capital assets are sold. Capital gains are taxed more favourably than earned income. However, this can be dependent on your tax bracket and the length of time you owned the asset before it was sold. You could pay approximately one-third to one-half less tax than you would pay on the same amount of earned salary.
  • Long Term Capital Gain (LTCG) Acronym,
    • Your loss from the sale of a capital asset that you held for more than 12 months.
  • Long-term Capital Loss Definition,
    • Your profit from the sale of a capital asset that you held for more than 12 months.
  • Median Price Definition,
    • In a given area, the amount paid for a house in which half of the houses in that area sell for less and half sell for more.
  • Recognized Gain or Loss Definition,
    • The amount of gain or loss reported for income tax purposes. You may be able to defer recognizing gain or loss on certain property exchanges, such as like-kind exchanges.
  • Short-term Capital Loss Definition,
    • Your loss from the sale of a capital asset that you held for one year or less.
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