Final answer:
The three types of losses that individuals may deduct are ordinary losses, casualty losses, and capital losses.
Step-by-step explanation:
The three types of losses that individuals may deduct are ordinary losses, casualty losses, and capital losses.
- Ordinary losses: These are losses incurred in the normal course of business or trade, such as losses from the sale of inventory or bad debts. Ordinary losses can be fully deducted against ordinary income.
- Casualty losses: These are losses that result from a sudden, unexpected, and identifiable event, such as damage or destruction of property due to a fire or natural disaster. Casualty losses can be deducted if they are not covered by insurance and exceed 10% of the individual's adjusted gross income.
- Capital losses: These are losses incurred from the sale or exchange of capital assets, such as stocks, bonds, or real estate. Capital losses can be deducted to offset capital gains, and any excess losses can be deducted against ordinary income up to a certain limit.
It's important to note that there are certain limitations and rules for deducting losses, so it's recommended to consult a tax professional or refer to the Internal Revenue Service (IRS) guidelines for specific details.