Am I correct on my logic regarding a write off for income tax on a capital loss? Open up?

Question

Assuming I sell a stock for a short term (less than 1 year) capital loss...

Say I buy a stock for $40 and it goes to $20 and I had a 100 shares and decide to sell to write it off my regular income tax. I am in a 25% bracket so I figure that if I lost $2,000 then that is able to be written off my income, and thus the government forgoes $500 (25% of my 2,000 loss). So I would not have lost $2,000 but actually $1,500 after I write it off. Is this correct?

Answer 1

That is correct.  However you must remember that capital losses over $3000 must be carried over to the next year until the loss has been completly used.

Answer 2

If your capital losses exceed your capital gains, the amount of the excess loss that can be claimed is limited to $3,000, or $1,500 if you are married filing separately. If your net capital loss is more than this limit, you can carry the loss forward to later years. Use the Capital Loss Carryover Worksheet in Publication 550, to figure the amount carried forward.