Categories: General Tax Terms
Capital Losses refer to the financial losses incurred when an asset, such as stocks or real estate, is sold for less than its purchase price.
In accounting and taxation, capital losses can be used to offset capital gains, which are profits from the sale of assets. If total capital losses exceed total capital gains in a given tax year, individuals or businesses may be allowed to deduct the loss against ordinary income up to a specified limit, depending on tax regulations. For example, if an investor sells stock for $5,000 that was originally purchased for $8,000, the investor realizes a capital loss of $3,000. This loss may reduce the investor’s taxable income if they have capital gains to offset it.
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