“Understanding How to Claim Losses on Stocks that Decrease in Value”

– Stocks are considered capital assets and can produce capital gains or losses when sold.
– Capital losses can be used to offset up to $3,000 of ordinary income ($1,500 for married taxpayers filing separately).
– Any excess loss beyond the limit is carried forward to later years, until it is used up.
– The wash sale rule prevents claiming a loss if substantially identical stock is bought within 30 days before or after selling at a loss. – Stock may become worthless if it has no liquidation value or potential for profit.
– A stock can be treated as sold on the last day of the tax year, and you can claim a loss equal to what you paid for it.
– You can amend your tax return for up to seven years if you discover a stock has become worthless after filing.
– Special tax relief may be available for victims of Ponzi-type investment schemes.

Claiming Losses on Depreciated or Worthless Stock