Suppose I sell a stock that I've owned for a few years,& lost $12K of my investment..how much can I write-off?

Question

I own shares in a stock that has dropped a lot.....if I sell it now, I'll lose $12K of my invesment (I invested $15K....it is now worth $3K!!) So if i do sell it, how much can I write off on my taxes as a loss?

My friend says I can write off $3K every year....so since I lost $12K, I can write off $3K every year for 4 years....is this true?

Answer 1

You are allowed up to a $3,000 NET loss.

Your take you gains and the subtract your losses - if you end up with a loss greater than 3k you will be able to deduct it in future years.

So if you happened to have,say $8,000 in gains and this $12,000 loss, your net loss would be $4,000. You would deduct $3k this year and use the additional $1k next year.

Answer 2

You can write off 100% losses against your capital gains, dividends and interest.

"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."

Carry forward losses can be forever, unless Congress w/ a new Pres changes the rules.

IRS Capital Gains and Losses

http://www.irs.gov/taxtopics/tc409.html

Selling Losing Securities For A Tax Advantage

http://www.investopedia.com/articles/04/...