Capital Loss
Definition
The loss incurred when you sell a capital asset for less than its purchase price. Capital losses first offset capital gains of the same type (short-term against short-term, long-term against long-term), then any remaining losses offset gains of the other type. If net losses remain, you can deduct up to $3,000 per year ($1,500 if married filing separately) against ordinary income. Unused losses carry forward indefinitely to future tax years.
Example
You sell stock A for a $10,000 loss and stock B for a $4,000 gain. Your net capital loss is $6,000. You use $3,000 to offset ordinary income this year and carry the remaining $3,000 forward to next year.
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