What is Capital loss limitation?
In short
Individuals can deduct a net capital loss against ordinary income only up to $3,000 a year ($1,500 if married filing separately). Corporations can deduct capital losses only against capital gains.
Key takeaways
- Individuals carry an unused net capital loss forward indefinitely, keeping its short-term or long-term character.
- Corporations carry net capital losses back 3 years and forward 5, treated as short-term.
- Losses on personal-use property, such as a personal car, aren't deductible at all.
Where it's tested
REG: Property Transactions: Gains, Losses & Like-Kind Exchanges — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An individual has net capital losses exceeding capital gains for the year. What amount may be deducted against ordinary income?