Question by Ed R: What is the best way to handle large investment losses on my taxes?
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!
Best answer:
Answer by SuzeY
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 00 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 00 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 00 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 ,000 gain and you can get rid of all of your carryforward losses next year!
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