DEFINITION of 'Ordinary Loss'

Any loss incurred by a taxpayer that is not considered a capital loss. Ordinary losses can stem from many causes, including casualty and theft. Ordinary losses that are larger than a taxpayer's gross income for the year can leave the client with zero taxable income on their 1040.

BREAKING DOWN 'Ordinary Loss'

Ordinary losses are not subject to the $3,000 annual limit that is imposed on capital losses; they can be for any amount. Business owners who fail to make a profit for the year can declare an ordinary loss on their returns. Ordinary losses are netted against ordinary income, which is taxed at the taxpayer's highest marginal tax rate. Ordinary losses can therefore offer the taxpayer greater tax savings than long-term capital losses.

  1. Ordinary Income

    Ordinary income is composed mainly of wages, salaries, commissions ...
  2. IRS Publication 547

    A document published by the Internal Revenue Service (IRS) that ...
  3. Tax Loss Carryforward

    A tax loss carryforward takes place where a business or individual ...
  4. Form 4684: Casualties And Thefts

    A tax form distributed by the Internal Revenue Service (IRS) ...
  5. Office Audit

    An examination of a taxpayer's records by the Internal Revenue ...
  6. IRS Publication 5 - Your Appeal ...

    A document published by the Internal Revenue Service outlining ...
Related Articles
  1. Insurance

    Deducting Disaster: Casualty And Theft Losses

    If you've been a victim, your losses may be deductible. Find out how.
  2. 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.
  3. Taxes

    5 Tax-Efficient Portfolio Tips for High Income Earners

    High income earners can use these tips to make their portfolio more tax-efficient.
  4. Taxes

    Start Over With The IRS

    If you're struggling to pay back taxes, try a fresh start with the IRS. They really can help.
  5. Taxes

    Carried Interest: A Loophole in America’s Tax Code

    With income inequality becoming an increasingly apparent problem in the U.S., it is time to start removing tax loopholes like carried interest.
  6. Investing

    7 Year-End Tax Planning Strategies

    Do you have a capital loss that could be booked and used to offset future tax liabilities? If so, it may be time to sell.
  7. Taxes

    7 Ways to Create a Tax-Efficient Portfolio

    Taxes may be a necessary evil, but that doesn't mean they can't be reduced. Here's a host of smart moves today's investors can make.
  8. Taxes

    Who Does The Current Tax Code Benefit?

    Are the non-workers benefiting from the current tax code in any way or is it the wealthy who are still getting the big breaks?
  9. Investing

    A Complete Guide to Tax Loss Harvesting With ETFs

    Using exchange-traded funds (ETFs) to harvest tax losses can be a smart way to maximize your portfolio's tax efficiency.
  1. How many votes am I entitled to, if I own ordinary shares of a company?

    Understand what an ordinary share is and how it may benefit investors. Learn how many votes an investor is entitled to, if ... Read Answer >>
  2. Do tax brackets include Social Security?

    Find out whether your Social Security benefits are subject to taxation, and learn how they can affect your tax bracket as ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center