A capital loss occurs when an individual or business sells an asset, such as stocks, bonds, real estate, or other investments, for less than the original purchase price. This type of loss represents a decrease in the value of the asset from the time it was acquired to the time it was sold. Capital losses can be used to offset capital gains, reducing the overall tax burden for an investor. If losses exceed gains, a portion may be deductible against other income, depending on tax laws.
Understanding capital losses is important for managing investment strategies and optimizing financial planning decisions.