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Long-Term Capital Loss Formula:
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Long-term capital loss occurs when you sell an asset that you've held for more than one year for less than its indexed purchase price. This loss can be used to offset capital gains and reduce your tax liability.
The calculator uses the long-term capital loss formula:
Where:
Explanation: The calculation determines the financial loss when the selling price is lower than the indexed purchase price for assets held longer than one year.
Details: Calculating long-term capital losses is essential for tax planning purposes, as these losses can be used to offset capital gains and potentially reduce your overall tax burden.
Tips: Enter the selling price and indexed purchase price in dollars. Both values must be valid (non-negative numbers). The calculator assumes the asset was held for more than one year.
Q1: What qualifies as a long-term capital asset?
A: Assets held for more than one year before selling are considered long-term capital assets for tax purposes.
Q2: How can I use capital losses on my taxes?
A: Capital losses can be used to offset capital gains. If losses exceed gains, you can deduct up to $3,000 against ordinary income annually, carrying forward remaining losses.
Q3: What is indexed purchase price?
A: Indexed purchase price accounts for inflation by adjusting the original purchase price using cost inflation index numbers provided by tax authorities.
Q4: Are there different rules for short-term vs long-term losses?
A: Yes, short-term losses (assets held ≤1 year) offset short-term gains first, while long-term losses offset long-term gains first, with different tax implications.
Q5: Do wash sale rules apply to long-term capital losses?
A: Wash sale rules typically apply to losses on substantially identical securities purchased within 30 days before or after the sale, regardless of holding period.