It can be used to offset gains in the same class of income, capital gains in your case. Pennsylvania (PA) has special rules when it comes to the different classes of income. Even if the loss shows on the PA-40, it will not reduce other income categories. In other words, a loss in one class of income cannot reduce a profit in another class of income if a loss is sustained.
For example, a business loss cannot offset an investment gain. For more information you can click this hyperlink:
- PA income tax rules for offsetting losses against gains
- The eight classes of income in which you directly earned, received, or realized the income (loss):
- (1) Compensation;
- (2) Interest;
- (3) Dividends;
- (4) Net Income (Loss) from the Operation of a Business, Profession, or Farm;
- (5) Net Gain (Loss) from the Sale, Exchange, or Disposition of Property;
- (6) Net Income (Loss) from Rents, Royalties, Patents, and Copyrights;
- (7) Income from Estates or Trusts;
- (8) Gambling and Lottery Winnings
