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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3166
Experience:  IRS licensed Enrolled Agent and tax instructor
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What is the best approach to file taxes in case of a massive

Customer Question

What is the best approach to file taxes in case of a massive capital loss? (stocks)
That is, what can you do if the capital loss is much greater than your total income? (salary based)
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
in case you can't do anything for this year, how much can you offset next year? The complete amount or just 3k?
That is, if you lost 500k one year in stocks, and next year you gain 500k, then is the total gain for next year 0 or 497k?
Expert:  emc011075 replied 1 year ago.

Capital loss deduction is limited to 3K per year. The rest will be carried to future years. The loss will most likely not reduce your salary to 0. You can use the looses to offset your other current of future capital gains. For instance if you have 25K in capital losses and only be able deduct 3K, you will have 22K capital loss carryover. Next year, when you sell a stock with a profit of 15K, you can use your capital gains carryover to eliminate the gain, claim additional loss of 3K and carryover 4K (22-15 - 3) to following year.

Expert:  emc011075 replied 1 year ago.

You can use capital gains from sale of stocks, sale of house or other investment property. All gains reported on Schedule D can be offset by the loss carryover.

Any questions?

Expert:  emc011075 replied 1 year ago.

Just checking in if you need more help. And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.