What does Capital Loss mean?
A capital loss occurs when a taxpayer sells a capital asset and the purchase price of the capital asset exceeds the sales price of the capital asset.
Capital losses are classified as either short-term or long-term, depending on the classification of the capital asset from which they result. A short-term capital asset is one purchased and sold within one year. A long-term capital asset is one purchased and held for more than one year before it is sold.
When a taxpayer has a capital loss in a given tax year that exceeds any capital gain, the additional capital loss may only be deductible up to $3,000 in the current tax year. In such cases, the taxpayer can carryover the capital loss to future tax years.