It’s tax season again, and if you’ve experienced stock losses, you may be wondering how to deduct them from your taxes. Here’s a step-by-step guide on how to do just that:
1. Determine your capital losses: Start by calculating your total capital losses for the year. This includes any losses from selling stocks, mutual funds, or other investments.
2. Offset gains with losses: If you have any capital gains for the year, you can offset them with your capital losses. This will reduce the amount of taxable gains you have to report.
3. Deduct up to $3,000 in losses: If your total capital losses exceed your capital gains, you can deduct up to $3,000 of the remaining losses against your ordinary income. Any excess losses can be carried over to future years.
4. Use Form 8949 and Schedule D: When filing your taxes, you’ll need to use Form 8949 to report your capital gains and losses, and Schedule D to calculate the overall gain or loss on your investments.
5. Keep accurate records: It’s important to keep detailed records of all your investment transactions, including purchase dates, sale dates, and amounts. This will help you accurately report your gains and losses to the IRS.
By following these steps and staying organized with your investment records, you can effectively deduct stock losses from your taxes and potentially reduce your overall tax liability.