What is the best way to handle large investment losses on my taxes?
July 1, 2009 by admin
Filed under Questions and Answers
I really screwed up and have over ,000 in investment losses this year! Our gross income from salaries for this year will only be around ,000.
In addition, I lost 00 in my Roth IRA. I just read that I can only deduct ,000 in investment losses. Does that include IRAs PLUS regular investment activities?
Also, will any interest I accrue via CDs or dividends from stocks or mutual funds essentially be tax-free now since I have such a large investment loss? Or is that a different category?
Please help, I really screwed up this year and am hoping somebody has some suggestions to make this better. Thanks in advance!
SuzeY on Wed, 1st Jul 2009 1:24 am
Actually, you have lots of questions here. First, investment losses are to be offset against investment gains (that includes any capital gain distributions from your mutual funds), but no greater than $3000 per year can be deducted on your tax return. The balance of the losses can be carried forward to future tax years, but no greater than $3000 can be written off in any year.
Your Roth losses aren’t deductible since they’re in a tax deferred investment.
As far as your other unearned income being tax free, only insofar as it’s no greater than the $3000 of losses. Investment losses must be offset against investment gains, not other unearned income like dividends, interest, or earned income like wages.
Hopefully, your next investment will give you a $47,000 gain and you can get rid of all of your carryforward losses next year!