DEFINITION of 'Short-Term Loss'

A capital loss realized on the sale or exchange of a capital asset that has been held for exactly one year or less. Net short-term losses are limited to a maximum deduction of $3,000 per year, which can be used against earned or other ordinary income.

BREAKING DOWN 'Short-Term Loss'

Short-term losses are determined by calculating all short term gains and losses declared on Part II of Schedule D. If the net figure is a loss, then any amount above $3000 must be deferred until the following year. For example, if a taxpayer has a net short-term capital loss of $10,000, then he can declare a $3000 loss each year for three years, deducting the final $1000 in the fourth year following the sale of the assets.

RELATED TERMS
  1. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  2. Short-Term Gain

    A capital gain realized by the sale or exchange of a capital ...
  3. Capital Loss Carryover

    The net amount of capital losses that aren't deductible for the ...
  4. Ordinary Loss

    Any loss incurred by a taxpayer that is not considered a capital ...
  5. Long-Term Capital Gain Or Loss

    A gain or loss from a qualifying investment owned for longer ...
  6. Tax Loss Carryforward

    A tax loss carryforward takes place where a business or individual ...
Related Articles
  1. Taxes

    Capital Losses and Tax

    Capital losses are never fun to incur, but they can reduce your taxable income. Knowing the rules for capital losses can help you maximize your deductions and make better choices about when to ...
  2. Managing Wealth

    Capital Losses and Tax

    When an investment sells for less than its purchase price, the difference is a capital loss.
  3. Taxes

    Here's How to Deduct Your Stock Losses From Your Tax Bill

    Learn the proper procedure for deducting stock investing losses, and get some tips on how to strategically take losses to lower your income tax bill.
  4. Taxes

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  5. Financial Advisor

    Top Tips for Deducting Stock Losses

    Investors who know the rules can turn their losing picks into tax savings. Here's how to deduct your stock losses.
  6. Financial Advisor

    Here's the Best Way to Skirt Capital Gains Taxes

    Taxpayers who know the rules for netting gains/losses can generate additional losses to net against the taxable gains in their portfolios. Here's how.
  7. Insurance

    Deducting Disaster: Casualty And Theft Losses

    If you've been a victim, your losses may be deductible. Find out how.
  8. Financial Advisor

    How to Help Clients Gain During a Down Market

    You can help clients see the silver lining in market downturns by using a few simple strategies. Here are a few.
  9. Financial Advisor

    Using Tax-Loss Harvesting to Keep Your Gains

    Harvesting tax losses is a key skill that investors can use to keep more of their money in their pockets the next time they file taxes.
  10. Taxes

    What Is Section 1231 Property?

    Section 1231 property is depreciable business property that’s held for a year or longer.
RELATED FAQS
  1. When would I have to fill out a Schedule D IRS form?

    In general, taxpayers who have short-term capital gains, short-term capital losses, long-term capital gains or long-term ... Read Answer >>
  2. How do I avoid paying excess taxes on securities I have sold?

    If you dispose of securities during the tax year, the profit or losses from the transaction are either capital gains or losses. ... Read Answer >>
  3. Is there a difference between capital gains and dividend income?

    Selling something for a profits leads to capital gains. A payment made by a corporations to stockholders is a dividend. Both ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center