1. What is Short-Term Capital Loss?

Short-term capital loss occurs when you sell an asset for less than its purchase price within one year of acquisition. This loss can be used to offset capital gains and reduce your tax liability.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( \text{Sell} \) — Selling price of the asset ($)
• \( \text{Buy} \) — Purchase price of the asset ($)

Explanation: A negative result indicates a loss, which can be used for tax deduction purposes when filing your tax return.

3. Importance of Calculating Capital Loss

Details: Calculating short-term capital loss is essential for accurate tax reporting, as it can help reduce your overall tax burden by offsetting capital gains and up to $3,000 of ordinary income per year.

4. Using the Calculator

Tips: Enter the selling price and purchase price in dollars. Both values must be valid (non-negative numbers). The calculator will compute the difference to determine your short-term capital loss.

5. Frequently Asked Questions (FAQ)

Q1: What qualifies as a short-term capital asset?
A: Any asset held for one year or less before selling is considered a short-term capital asset.

Q2: How much capital loss can I deduct?
A: You can deduct capital losses up to the amount of your capital gains plus $3,000 per year ($1,500 if married filing separately).

Q3: Can I carry forward unused capital losses?
A: Yes, unused capital losses can be carried forward indefinitely to future tax years.

Q4: Are there any assets that don't qualify?
A: Personal-use property and certain other assets may have different tax treatment for capital gains and losses.

Q5: How does short-term loss differ from long-term loss?
A: Short-term losses offset short-term gains first, while long-term losses offset long-term gains first, with different tax rate implications.