Watching the market lose money is frustrating, but every cloud has a silver lining.

How to Claim Losses on Stocks on Your Taxes - Budgeting Money

You can take tax deductions for your stock market losses, up to a certain amount. Those deductions can offset your income or gains from other investments. Keep in mind, too, that technically you haven't lost any money until you sell, and if you hang in there, those stocks might bounce back.

As the stock market rises and falls, your gains and losses are just paper losses. It may be disheartening to see the value of your assets decline, but the loss is not etched in stone until the day you sell.

There are no immediate tax consequences on paper losses, but taxes come into play once you sell your stocks.

Easy money: Deducting your tax losses could save you up to $1, this year - AOL Finance

When you sell, the difference between your cost basis and the sales price is either a capital gain or a capital loss. Make sure you do not buy back into the same mutual fund or stock within 30 days, because tax rules prohibit you from then claiming the capital loss. If you hold stocks as part of mutual funds, the situation is a little different. Fund managers regularly buy and sell stocks within the fund.

You always pay taxes on ordinary gains and dividends. Even when the stock market is down, a fund can still post a gain if it sold stocks that had been held for a long time and made money over the long term.

Mutual funds cannot pass along losses to shareholder in the same way they do gains. Losses can stay on the books and be used to offset future gains within the fund for up to seven years, but they are not directly passed to individuals.

If you sell your mutual fund shares at a loss, however, you can take a capital loss tax deduction just like you do with individual stocks.

Stock market losses within retirement accounts have no direct impact on your personal income taxes. Since you do not pay taxes on gains or dividends, you also do not take losses from declines.

When you reach retirement age and start to take distributions from a k , traditional IRA or similar account, the distributions are treated as ordinary income without regard for gains or losses. Roth IRAs are tax free, so stock market losses affect the overall value of the asset but not taxes.

Annabella Gualdoni has written newsletters and reports for corporations and nonprofits since Gualdoni has a Bachelor of Arts in international development from University of California, Berkeley, a Master of Arts in international relations from Boston University, and a Juris Doctor from Boston College Law School.

Paper Losses As the stock market rises and falls, your gains and losses are just paper losses. Tax Implications from Sales When you sell, the difference between your cost basis and the sales price is either a capital gain or a capital loss.

Losses and Mutual Funds If you hold stocks as part of mutual funds, the situation is a little different. Losses and Retirement Accounts Stock market losses within retirement accounts have no direct impact on your personal income taxes. References Internal Revenue Service IRS: Selling at the Bottom Offers Tax Advantages New York Times: First an Awful Year for Mutual Funds.

Now, the Tax Bill. Mutual Funds —- Big Losers Can be Big Tax Shelters CNN Money: Cut your Taxes in Retirement. Resources American Association of Individual Investors: Capital Pains -— Rules for Capital Losses Morningstar: How to Harvest Gains in Your Portfolio. About the Author Annabella Gualdoni has written newsletters and reports for corporations and nonprofits since How to Calculate Capital Loss Carryover Can You Claim Tax Loss on Stock Sales in IRA Accounts?

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