- To claim a loss from business operations, file an IRS Form 1040 Schedule C, Profit or Loss from Business. If you have losses from a partnership, however, you must generally file a Form 1065 or 1065-B. This form allows you to total up income from your business and expenses from all sources. If you have an operating loss from business activity, you must note it on line 12 of a Form 1040 as well as line two of a Schedule SE, which accounts for self-employment tax.
- Casualty losses include losses to your home, household property and vehicles. Generally, you can deduct casualty losses not covered by insurance on your federal income tax return. You can also deduct losses due to theft and fraud by filing a Form 8684, Casualties and Thefts. For casualty losses for business, download and complete Publication 584B, Business Casualty, Disaster and Theft Loss Workbook. You can also deduct gambling losses if you itemize deductions. However, you cannot claim losses in excess of your winnings, as reported on your tax return. Keep careful records of any gambling activities.
- Beginning in 2011, the IRS will levy a 20 percent capital gains tax rate on most property or securities sold at a profit, provided the property has been in your possession for over a year. If the property or security has not been held for a year, then the IRS will tax it at your marginal income bracket of up to 39.6 percent, depending on your income. However, you can deduct any losses against any gains. Long-term losses are deducted against long-term gains at 20 percent, while short-term losses are deducted against short-term gains at your marginal income tax rate. If you have more losses than gains, you can deduct up to $3,000 in losses against income. You can carry forward any unused losses and write off up to $3,000 per year of income until the entire capital loss is used up.
- If you sell a security and claim a capital loss, you cannot repurchase the same or substantially identical security for at least 30 days. To get around this requirement, you may purchase a similar security, such as stock in an equally well-run direct competitor or a mutual fund with very similar composition and investing style.
- Certain assets do not generate a capital gains tax liability when sold at a profit, nor a capital loss deduction when sold at a loss. For example, assets in retirement plans do not generate a capital loss. Collectables are taxed under a separate system and are not considered capital gains, but they may be considered casualty or theft losses if they are stolen or destroyed.
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