Capital losses, not capital gains, need urgent tax relief | American Enterprise Institute – AEI

Investors must pay capital gains tax when they sell assets at a profit and may claim a capital loss deduction when they sell assets at a loss. However, the capital losses deducted in a particular year are limited to the amount of capital gains taxed in that year plus $3,000. In other words, an investor may not deduct a net capital loss larger than $3,000 for the year.

For example, suppose an investor has $12,000 of capitalgains from sales of some assets and $20,000 of capital losses from sales of otherassets. The investor may deduct $12,000 of losses to fully offset the gains andanother $3,000 to offset other income. In total, the investor may deduct$15,000 of the losses. No immediate deduction is allowed for the remaining $5,000of losses. However, those losses can be carried forward into future years, tobe deducted as soon as the $3,000 limit permits.

via www.aei.org

Yuck. Another stupid tax rule that needs changing.