Capital loss is the difference between a lower selling price and a higher purchase price or cost price of an eligible

Capital asset A capital asset is defined as property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or i ...

, which typically represents a financial loss for the seller. This is distinct from losses from selling goods below cost, which is typically considered loss in business income.

United States

The

IRS The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax ...

states that "If your capital losses exceed your

capital gains Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares. ...

, the excess can be deducted on your tax return." Limits on such deductions apply. For individuals, a net loss can be claimed as a

tax deduction Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and tax credits ...

against ordinary income, up to $3,000 per year ($1,500 in the case of a married individual filing separately). Any remaining net loss can be carried over and applied against gains in future years. However, losses from the sale of personal property, including a residence, do not qualify for this treatment. Special

wash sale A wash sale is a sale of a security ( stocks, bonds, options) at a loss and repurchase of the same or substantially identical security (judging by CUSIP or Committee on Uniform Securities Identification Procedures numbers) shortly before or afte ...

rules apply if the same or substantially similar

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that c ...

is bought, acquired, or optioned within 30 days before or after the sale.IRS TAX TIP 2009-35
/ref> According to 26 U.S.C. §121, a capital loss on the sale of a primary residence is generally tax-exempt.. IRC 165(c) is a stronger source that limits the loss on the sale of a personal residence. IRC 121 is for exclusion of gain of primary residence and does not talk about loss.

References

Pricing Capital gains taxes Tax terms {{Econ-policy-stub