Originally Posted by ahmedmo
hello, can someone please help me understand what is meant by unearned income,
#2;how we can report it, is there any deduction applicable to them. thanks.
#1;Unearned income is income which is not from your wages, salaries, tips, or self-employment business income. Unearned income include income from capital gains, Social Security, child support and interest/dividend income. Some unearned income, such as Social Security, is non-taxable unless combined with other income, while income like capital gains is always taxable income.
#2;you need to report your unearned income,i.e., capital gain on Sch D or form 8949 on 1040 line 13, or you need to report your dividend income on 1040 line 9a or etc. Your deductible short-term capital losses are those assets you own for one year or less. If you purchase the share of stock on oct. 20, 2010 and sell it on June 20, 2011, then you must treat it as a short-term loss. The significance is that these losses can offset any of your other short-term gains first, with the excess able to reduce your taxable long-term gains. If you have no other long-term gains, then you can deduct up to $3k of the loss per year against your other income until the loss is fully deducted. When you hold the stock for more than one year, then your loss is a long-term capital loss. You first net your long-term capital losses with any long-term capital gains. If these losses exceed the gains, then you can use the excess loss to reduce your taxable short-term capital gains. If it exceeds your short-term capital gains, the losses are also deductible up to $3k per year with the remaining amounts deductible in future years subject to the same annual limitations.
Note; if you sell a home for less than the amount you had invested in it, you may incur a capital loss. Unfortunately, if you used the home as your primary residence called capitall asset, the loss isn't typically deductible on your federal income taxes. However, if you used the home for business purposes, you may be able to deduct a portion of the loss from your taxable income.