1

If I lose $1 million due to a bad investment, but my income is only $100,000 and my annual taxes are $35,000.

Can I write off all my income for the next 10 years?

  • No but your capital gains will be tax free for the next 7 years – CQM Aug 17 '16 at 7:13
  • @CQM That doesn't really help if I don't have any capital does it? – Five Bagger Aug 17 '16 at 8:29
  • Correct, you were looking for help? – CQM Aug 17 '16 at 15:37
4

According to this page on the IRS site capital losses must first be used to offset any capital gains. Any excess losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately) on line 13 of Form 1040.

You can then carry forward your net capital loss to future tax years. Obviously, at $3000 pa it will take more than a lifetime to get relief on a $1,000,000 capital loss.

2

As Nick replied, producing $1M in capital gains would solve the issue. 2 other thoughts -

Find, and marry, someone with a short term gain of $1M. That would let you use the loss in one year.

Buy a rental property with a value, besides the land, of $1M. When you sell it, 27.5 years hence, while the rest of us would have to recapture and pay tax on the depreciation, you get to write off your losses against it. If the property rises in value, it may not take the full 27.5 years to make this work.

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