How To Report Stock Loss on an Income Tax Return

Taxes are an individual’s compulsory contribution to the country’s revenue. There are various types of tax, and one of them is capital gains tax. This is the tax imposed on the gains or profits obtained from the sale of capital assets like stocks. Since these capital gains are an individual’s source of income, they are also subject to income tax. However, if an individual experiences a stock loss, the individual could report stock loss in his income tax return to and countries have their own tax laws to partly compensate for the loss of value of the stock. Usually, the loss will be deducted from any capital gain that have incurred. This will be reported in the individual’s tax return.

This article will guide you on how to report stock loss in your income tax return.

  • Get all the documents needed. You can either go personally with the Internal Revenue Service or with the state or local tax collection agency, or just download it from the Internal Revenue website. You should get Schedule D for Form 1040, and then select capital losses when asked by the software which capital tax you will report.
  • Calculate the amount of stock losses that have incurred. If you are filing as a single or separate from your husband/wife, you can only deduct up to $1,500, while if you are filing jointly with your husband/wife, you can deduct up to $3,000. If you have more than $3,000 stock loss, you should consult a tax professional. You should also determine whether your stock is long-term or short-term. Usually, stocks held for less than a year are considered short-term.
  • Fill-out the form. The form will ask about your basic information like name, tax identification number, and information particular to your stock on part I of the form. Input all the details needed like the exact date you bought the stock, how much you bought it for, the date you sold the stock and how much you sold it for.
  • Calculate for the total amount of loss that can be returned. This is done by following the instructions and computations provided in the form. You input first the amount of loss that has been incurred, and from there you can calculate the amount you can claim in the current year. Should there be an excess from the maximum amount one can claim for the current year, the excess will be carried over to the succeeding tax year.
  • Fill-out the remaining lines. On Line 13 of Form 1040 of Schedule D, write the total calculated previously and then deduct the loss from your overall income. Label it as capital loss.
  • Check the form. Make sure that you have completely filled-out all the necessary information. Add “not applicable” in the lines that you think does not apply in your case. Take note also that the form is back and forth, so you should completely fill out both pages.

Take note that should you have further problems in filing your income tax return, you can always consult with a tax professional to ease your burdens.


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