Dividends not off set by stock losses

[simfreak101]

I have collected a fair amount of dividends this year, I also sold a stock for a loss; The loss on that stock is only writing off $3000 instead of the whole amount and 'carrying it forward'

I would assume the stock loss should wash out the dividend gain and be a net 0?

[robtm]

The stock loss was a Capital Gain loss and only offsets other Capital Gains. The dividends are not considered Capital Gains. The IRS only allows Capital Gains losses to apply $3000 against other income and to carry the balance of the loss forward to next years taxes.

[simfreak101]

Thanks, seems like i made a big mistake this year then :( wish i would have known that ahead of time. 

[nu2tenn]

Simply put, dividends and interest are considered ordinary income for tax purposes.  Stocks and bonds are considered for the most part capital assets.  You can only apply $3,000 from losses from sales of capital assets (such as stock losses) against ordinary income in any tax year. Any loss above that will roll over to the following years until the losses are fully exhausted. 

Note that if you had gains from other capital assets, you could apply the losses to the extent of the gains.  For example, if you had a $10K loss on one stock and a 12K gain on another, you could utilize the full 10K loss.