How to Deduct Stock Loss on Income Taxes
- 1). Obtain a 1040 form and Schedule D from the IRS website, or from your local public library or legislative office. Use the Schedule D to detail your capital gains and losses. For instance, if you buy a block of stock for $5,000 and sell it a year later for $7,000, you have a capital gain of $2,000, and must pay taxes on that amount. If you buy a stock for $6,000, hold it for a year and sell it for $5,000, you have a loss of $1,000, and you can use that loss to offset any gains you have on other securities.
- 2). Enter each short-term capital gain or loss in the detail section of Section 1 of Schedule D. Add up all your short-term gains and losses and enter the total on line 7. For tax purposes, short-term capital gains and losses are for securities held less than one year.
- 3). Detail your long-term capital gains and losses in Section 2 of Schedule D. For IRS purposes, long-term refers to stocks held for a year or longer. Enter the total gains and losses on line 15.
- 4). Enter the combined total for long- and short-term capital gains on line 16 of Schedule D. If you have a loss, skip to line 21 of the form.
- 5). Transfer the amount from line 16 to line 21 of Schedule D. Record the same amount on line 13 of your 1040 form. Complete the rest of your tax return and submit it to the IRS.
Source...