There A limit To The Amount On My Federal Taxes?
Q: In 2008 I had Forex losses. Can I claim these on my federal taxes?Is there a limit to the amount I can claim?Will the claim count as a “deduction” or can I still keep the standard deduction?Do I need a form from my broker? If so, what form?What if I already filed, can I file an amendment or something?
A: Forex Losses are capital losses, similar to stock losses I believe.
This means the rule is that if you have no other losses and no other stock profits of any kind, the limit is $4,000 you can deduct against your salary (ordinary income).
If you do have stock gains that you would have to pay tax on, you can deduct your Forex losses against those gains before you are entitled to the $4,000 deduction. So lets say you made $3,000 in stock gains. And lost $8,000 in Forex (hypothetical). (Then $3,000 would offset the stock gains, then another $4,000 would go against income, and the last $1,000 you would not be able to deduct this year – you’d have to use it to offset stock gains or Forex gains in a guture year)
If you have other stock losses, then you have to include those as part of the $4,000 deduction. So if you had $3,000 in stock losses, you can only deduct up to $1,000 from Forex losses if you have $1,000 or more in Forex losses to claim.
Lastly, if you do exceed the limit, you can carry the losses forward forever if you are not a corporation. But until you get gains in future years, you can’t use out the losses from this year as a tax reduction.
If you earned less than $4,000 of income this past year, then it gets even more complicated. You can never deduct more than you have.
Much like any other capital gains and losses, your max. you can claim in losses each year, after netting gains and losses between short and long-term, is $3,000. The rest gets carried forward to future tax years.
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