Hi,
I sold some mutual fund shares in 2008. All of them were sold at a loss. I do not have any capital gains that I can use these losses as an offset. So, as far as I understand it, reporting these losses on my tax form will not change my tax liability in any way.
Does it make sense for me to even bother and report all these sales? Is it required by law to report the mutual fund share sales to IRS even if there's no tax liability on them?
Thanks.
"Leo" wrote
Yes, you must report the sales amount, less your cost basis, so that the IRS knows what your loss is. Otherwise they'll issue you a notice fixing your mistake and demanding the tax on the gross sales of the mutual fund.
In other words, they don't have the foggiest idea that you incurred a loss till you report that loss on a Schedule D filed with your return.
In addition, that loss will partially off-set current year income by as much as $3000, with the remainder being carried forward to off-set any capital gains and then another $3000 against regular income till the total losses are gone. It could take years, but that little amount of work done today will provide years of decreased taxes in the future.
Most definately file for 2008. Under current tax laws you can use losses to offset future gains and income indefinately until the losses are used up. Right now its $3000 offset per year against non-gain income. (McCain proposed raising this amount in his presidental platform.) Theres a line in Schedule D for propogating previous years' losses.
I personally canceled gains taxes in 2003-2005 from 2001 losses. Very nice.
Excellent and very valuable replies - thank you both!
At $3,000 per year I will die long before I use up my losses. Unless... the stock market ever goes up! Naw, not likely.
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