Offset Capital Gains

• You can use the losses you suffered in your mutual funds to offset any gains you had in your other accounts. It is important, therefore, to track your mutual fund sales and purchases carefully. Once you know how much you paid when you bought the fund and how much you received when you sold the fund, you can calculate your total capital gain and use any losses you suffered to offset those gains to reduce your tax liability.
  
  

Write Off Losses

• You can write off capital losses even if you do not have off-setting gains. That means you can deduct up to $3,000, as of 2011, in losses on your mutual funds and use that amount to reduce the taxes you owe or boost the size of your refund. If your mutual fund losses are more than $3,000, you can carry over the excess amount to next year's tax return. If you do have more than $3,000 in losses on your mutual funds, be sure to keep a copy of that return so you can get credit for any excess losses when you file your taxes next year.
  
  

Schedule D

• If you do have either capital gains or losses, those amounts are reported on Schedule D. Schedule D includes specific sections for listing each security you sold during the year, along with the original purchase price, the total proceeds and the total gain or loss. The total amounts for your gains and losses are then transferred to your 1040 form.
  
  

Retirement Accounts

• You cannot write off any losses you suffered for mutual funds held within a tax-deferred account like a 401k, 403b or IRA account. Since these retirement accounts are not subject to current taxation, the IRS does not permit you to write off any capital losses on the mutual funds and stocks held within those accounts. On the other hand, you do not have to report, or pay taxes on, any capital gains you make along the way. The money in these tax-deferred accounts is only subject to taxation when you actually start drawing on it.