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Losses (Homes, Stocks, Other Property)

Question:   I own stock which became worthless last year. Can I take a bad debt deduction on my tax return?

Answer:   If you own securities, including stocks, and they become totally worthless:

  • You can take a worthless security deduction for the loss, but you can not take a bad debt deduction.

The worthless securities are:

  • Treated as though they were capital assets sold on the last day of the tax year.
  • Reported on Form 1040, Schedule D (PDF), in Part 1 or 2 depending on whether you held the stock short term or long term.
  • And indicated by writing "Worthless" in the applicable column of Form 1040, Schedule D (PDF), Capital Gains and Losses.

Additional Information:
Category: Capital Gains, Losses/Sale of Home

Subcategory: Losses (Homes, Stocks, Other Property)


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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224


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Page Last Reviewed or Updated: January 23, 2012