Definition of Capital Loss

Capital loss is the loss occurs from the investment or real estate, if the value of the investment decreases. The loss will be realized when the asset or investment is sold at the price lower than the purchased price. It can be countered against capital gain in order to reduce the liability of tax.

Explanation

For example, if an investor bought a house for $250,000 and sold the house five years later for $200,000. The investor would realize a capital attrition of $50,000.

A capital loss is also tax deductible, if it is realized. According to the IRS, every asset owned by an individual or company will be considered as a capital asset and it will be subjected to the capital gain or loss deductions.

It is also reported by the taxpayers in accordance with the IRS schedule D. by offsetting the capital losses with gains, investor have a small portion of relaxation as it will lower the investor’s tax bill.