Today TaxMama hears from Brian in Kentucky who tells us. “In 2006 I sold my house and had some decent profits. I decided to invest some of it and lost $13,000 quickly in the stock market so I closed my accounts. No more of that for me. If I don’t have any capital gains in 2006 can I still write this off my taxes? I looked at my 2005 return I did in TaxCut and I do not even see where I would have written it off (if it had occurred in 2005). What form is it please?”
Well, it was a nice try – your foray into the market. What a shame.
Oh well, yes, you can deduct the loss on Schedule D.
Or at least $3,000 each year, until you use up all that loss – or until you buy more investments and make a profit.
If you ever want to get back into the market again, and you want to do it on your own, do this first:
1) Select the stocks you’d like to buy, within the budget you have to invest.
2) Set up a page for each stock (on paper or your favorite graph or spreadsheet software) and track the stock’s performance – by day or week, or whenever you would normally be checking, if you owned it.
3) Make a note of when you would have sold it. And record your gains or losses. Be honest with yourself. Don’t fudge.
4) And then, use the paper proceeds from the sale to ‘buy’ the next stock.
At the end of 6 months, see how your portfolio turned out.
Better yet, use the free-online Portfolio Tracker at MarketWatch.com
If you did well, you’re probably ready to try again. If not… If you find you’re not very good at knowing when to buy or sell, either stick with mutual funds that have solid, steady long-term
track records, or hire a certified financial planner or go to a full-service broker and let the broker manage your funds…
Or stay out of the market entirely and try other investments over which you can have more control – like real estate, where you’ve already done well.
And remember, you’ll find answers to questions about investment losses and all kinds of tax issues, free. Where? Where else? At TaxMama.com
To make your comments, please visit TaxMama’s Parlor at TaxTwist.com.
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxTwist.com :: Where TaxQuips will be moving & You can add your comments
- IRS Schedule D :: Capital Gains and Losses
- MarketWatch.com :: Online Portfolio Tool
File Download (2:24 min / 0.5 MB)