Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
50% - Moderately

Capital Loss

Synonyms:depreciate, devalue, reduced worth
Filed Under: financial-banking, investments, taxation
Tags: banking, investment, taxes

Definition of capital loss

capital loss
1. When you sell an asset for less than you paid for it, or less than its adjusted basis, you have a capital loss. While it's never fun to lose money, when it comes to taxes a capital loss isn't necessarily all bad. You can reduce the amount of income that will be taxed by the amount of your loss, up to $3,000 per year. If your loss is more than that, you can carry the excess, known as capital loss carryover, forward indefinitely until the total loss is used.

Related Terms and Acronyms:

  • adjusted basis   The amount you use to determine your profit or loss from a sale or exchange of property.
  • basis   That on which a thing rests or is founded.
  • capital   Money that is used to make money; for example, to buy rental property or a business.
  • capital assets   Items that you own for investment or personal purposes, such as stocks, bonds or stamp collections. When you sell a capital asset, depending on the price you earn a capital gain or a capital loss. Gains are taxed at a special rate, and losses can be used in many cases to reduce the amount that is taxed. See also "Capital Gain" or "Capital Loss."
  • capital gain (CG)   The profit made by the seller when real estate or other capital assets are sold. Capital gains are taxed more favourably than earned income. However, this can be dependent on your tax bracket and the length of time you owned the asset before it was sold. You could pay approximately one-third to one-half less tax than you would pay on the same amount of earned salary.
  • long term capital gain (LTCG)   Your loss from the sale of a capital asset that you held for more than 12 months.
  • long-term capital loss   Your profit from the sale of a capital asset that you held for more than 12 months.
  • median price   In a given area, the amount paid for a house in which half of the houses in that area sell for less and half sell for more.
  • recognized gain or loss   The amount of gain or loss reported for income tax purposes. You may be able to defer recognizing gain or loss on certain property exchanges, such as like-kind exchanges.
  • short-term capital loss   Your loss from the sale of a capital asset that you held for one year or less.

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