Capital Loss

When a capital asset decreases in value over a period of time (a process called "depreciation") the financial term to describe the declining worth of the asset is "capital loss." This is the value of the capital asset under the price originally paid for the asset. On the other hand, the appreciation or increase in value of a capital asset from the price paid for the asset is referred to as "capital gain."

Such losses can be accrued on real assets such as real estate; on financial assets such as stocks and securities traded on the financial markets; and on personal property such as items in an individual's home. Section 1222 of the United States tax code stipulates that while capital gains are taxable, capital losses on personal use capital assets cannot be declared as a deductible capital loss. So, if an individual sells their personal automobile at a rate lower than that originally paid for the vehicle, there is no deductible loss on the vehicle for tax purposes.

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