Can I Offset Stock Gains With Losses?

Can I Offset Stock Gains With Losses?

If you’ve asked “can i offset stock gains with losses” while planning taxes, this article explains how realised investment losses can reduce taxable capital gains — and sometimes ordinary income — under U.S. federal rules. Read on to learn the netting process, wash‑sale risks, special cases (retirement accounts, crypto), practical tax‑loss harvesting techniques, sample calculations, required forms, recordkeeping, and when to consult a tax pro. The guidance below follows IRS Topic No. 409 and Form 8949/Schedule D instructions as current at publication.

Overview of Capital Gains and Capital Losses

Capital gains occur when you sell a capital asset (stocks, ETFs, bonds, and most cryptocurrencies held as investment property) for more than your adjusted basis. Capital losses happen when you sell for less than your adjusted basis. Only realised gains and losses — sales or dispositions that close your position — matter for tax purposes; unrealised (paper) gains or losses do not affect your tax bill until realised.

In the context of the common query “can i offset stock gains with losses”, the key phrase is realised: you must sell to crystallise a loss. For U.S. federal tax purposes, most securities held as investments are capital assets, and the tax code treats their gains and losses according to holding period and netting rules described below.

How Losses Offset Gains — Netting Rules

The IRS applies a two‑step plus combine netting process to determine your net capital gain or loss for the tax year. This process answers the practical question “can i offset stock gains with losses” by showing how different types of gains and losses interact.

1. Step 1 — Net short‑term gains and short‑term losses against each other. Short‑term refers to assets held one year or less.
2. Step 2 — Net long‑term gains and long‑term losses against each other. Long‑term refers to assets held more than one year.
3. Step 3 — Combine the short‑term net result with the long‑term net result to produce a single net gain or net loss for the year.

If the combined result is a net gain, that amount is taxable (subject to short‑term ordinary rates for short‑term portions and preferential rates for long‑term portions). If the combined result is a net loss, you can deduct up to the annual limit against ordinary income and carry forward any excess to future years.

Short‑Term vs Long‑Term Treatment

Holding period matters. Short‑term is assets held one year or less; long‑term is more than one year. Short‑term gains are taxed at ordinary income rates; long‑term gains may qualify for reduced rates (0%, 15%, or 20% at the federal level depending on taxable income). Because short‑term gains are often taxed more heavily, losses that offset short‑term gains provide greater immediate tax benefit.

When investors ask “can i offset stock gains with losses”, they should pay attention to whether losses are short‑term or long‑term and the ordering in which the IRS nets them; the process automatically matches like with like first (short vs short, long vs long), then crosses them as needed.

Limits on Using Capital Losses Against Ordinary Income

If your net capital result after netting is a loss, U.S. federal rules let you use that loss to reduce ordinary income up to an annual limit. For most taxpayers filing single or married filing jointly, the limit is $3,000 per year ($1,500 if married filing separately). Any remaining unused loss carries forward to future tax years indefinitely until fully used.

So when wondering “can i offset stock gains with losses” and whether losses can eliminate wages or other ordinary income, the short answer is: partially — up to $3,000 per year — with the remainder carried forward.

Reporting Requirements and Tax Forms

To report sales, gains and losses you will typically use Form 8949 to list individual sales and adjustments, and Schedule D (Form 1040) to summarise capital gain/loss totals and calculate net gain or loss. Accurate reporting requires keeping records of purchase dates, sale dates, cost basis, sale proceeds, and any adjustments such as wash‑sale disallowances.

Broker statements commonly provide a consolidated 1099‑B that reports proceeds and possibly basis information. However, broker data can be incomplete or inconsistent; taxpayers remain responsible for correct entries on Form 8949 and Schedule D.

The Wash‑Sale Rule

One of the most common traps when taxpayers ask “can i offset stock gains with losses” is the wash‑sale rule. The wash‑sale rule disallows a loss deduction if you buy the same or a “substantially identical” security within 30 days before or after the sale that generated the loss — a 61‑day window centered on the sale date.

When the loss is disallowed by the wash‑sale rule, the disallowed loss is not lost forever; instead it is added to the cost basis of the replacement shares. That postpones the loss until the replacement shares are sold (assuming no further wash sales). Brokers often identify wash sales on consolidated statements, but you should verify adjustments when preparing Form 8949.

Interpreting “substantially identical” can be complex. For individual stocks, the rule is usually straightforward: repurchasing the same ticker triggers it. For funds and ETFs, assessments depend on overlap in holdings and legal similarity. A swap of one ETF for another with very similar exposure may or may not be treated as substantially identical — caution is warranted.

Avoiding Wash‑Sale Traps

• Wait more than 30 days after the sale before repurchasing the same security (or buy only after the 31st day).
• Buy a similar but not substantially identical security to maintain market exposure — for example, a different ETF or mutual fund with similar but not identical holdings.
• Use tax‑aware replacement strategies: choose funds with different issuers or different share classes to reduce the risk of being treated as substantially identical.

Remember that the wash‑sale rule also applies across accounts in many situations: purchases in taxable accounts can trigger wash sales for sales in taxable accounts, and in some circumstances purchases in tax‑advantaged accounts (like IRAs) can create complicated outcomes (see Special Cases below).

Special Cases and Exceptions

Retirement accounts: losses that occur inside tax‑advantaged accounts (IRAs, 401(k)s) generally are not deductible against taxable income. Moreover, if you sell a security at a loss in a taxable account and you or your spouse repurchases the same security inside an IRA within the 61‑day window, the wash‑sale rule can apply and the loss becomes permanently disallowed because the disallowed loss is added to the basis of the IRA asset (and IRAs don’t recognise basis in that way). This is a common and permanent trap.

Inherited assets and gifts: special basis rules apply. Generally, inherited assets receive a stepped‑up (or stepped‑down) basis at the decedent’s date of death, and prior owner losses do not carry over to the beneficiary. Gifts carry the donor’s basis in many cases, which can affect the calculation when sold.

Mutual fund and ETF distribution timing: funds distribute realized gains to shareholders. Those distributions can create capital gain income for fundholders even if you didn’t sell. Losses from other holdings can offset those distributions in the annual netting process.

Crypto and Other Non‑Stock Investments

Many of the same principles apply to cryptocurrencies treated as property by the IRS: realised vs unrealised, short‑term vs long‑term holding periods, and the netting process. However, the wash‑sale rule’s application to cryptocurrencies has been debated because wash‑sale law specifically mentions stocks and securities; as of the report date below, the IRS had not issued definitive public guidance explicitly extending the wash‑sale rule to cryptocurrencies.

As of 2026-01-18, according to IRS Topic No. 409 and the general treatment of crypto as property, taxpayers should report crypto sales and follow netting rules, but they should also track the position and consult professionals about wash‑sale risk for crypto. For investors using wallets, Bitget Wallet is recommended for integrated recordkeeping when trading on Bitget's platform.

Special asset classes such as collectibles, real estate, and certain partnership interests have distinct tax treatments. Collectibles may face different capital gain rates; real estate has depreciation recapture rules and like‑kind exchange rules (Section 1031 is limited), so the simple stock‑loss framework may not apply.

Tax‑Loss Harvesting Strategy

Tax‑loss harvesting is the deliberate sale of losing positions to realise losses that offset realised gains or up to $3,000 of ordinary income per year, then replacing the exposure while managing wash‑sale risk. When executed carefully, tax‑loss harvesting can lower current tax bills and create loss carryforwards for future years.

Key pros and cons:

• Pros: lowers taxable gains now, can offset higher‑tax short‑term gains first, preserves long‑term market exposure when replacements are used correctly, creates a loss bank for future gains.
• Cons: transaction costs and bid/ask slippage, administrative burden and recordkeeping, wash‑sale risk if repurchases are too quick or executed across accounts, and potential for suboptimal investment decisions made for tax rather than economic reasons.

When Tax‑Loss Harvesting Makes Sense

Tax‑loss harvesting commonly makes sense when:

• You have large short‑term gains that would be taxed at higher rates and losses can be used to offset them.
• You need to rebalance and prefer to realise losses now rather than trimming winners only.
• The market is volatile and you can opportunistically harvest losses without losing intended exposure (using non‑substantially identical replacements).

It’s less useful when expected trading costs, the chance of missing a rebound, or the administrative complexity outweigh tax benefits.

State Taxes and Other Considerations

State tax rules vary. Many states follow federal treatment of capital gains and losses, but some treat capital gain rates, netting rules, or carryforward rules differently. Check your state tax guidance or consult a tax professional on state‑level consequences.

Also consider interactions with the Net Investment Income Tax (NIIT) and the Alternative Minimum Tax (AMT). Large gains or losses can affect various thresholds and phase‑ins, so a larger‑scale tax plan should consider these taxes.

Examples

Below are simple numeric examples to clarify how the netting and deduction mechanics work when you ask “can i offset stock gains with losses”. All examples use rounded numbers and assume U.S. federal tax rules only.

Example 1 — Offsetting a Long‑Term Gain With a Long‑Term Loss

Scenario: You sold Stock A (long‑term) for a $10,000 gain. You sold Stock B (long‑term) for a $6,000 loss. After netting long‑term gains and losses, your net long‑term gain = $10,000 − $6,000 = $4,000. That $4,000 is a net long‑term gain and is taxable at long‑term capital gains rates.

Example 2 — Netting Short vs Long

Scenario: Short‑term gains of $8,000 (from sales of holdings held <1 year), long‑term losses of $5,000. First net short‑term: $8,000 (no short‑term loss). Long‑term net: −$5,000. Combine: $8,000 + (−$5,000) = $3,000 net gain for the year. The $3,000 is taxable: part attributable to short‑term portion is taxed at ordinary income rates, but report the combined net on Schedule D per instructions.

Example 3 — Excess Loss Deduction and Carryforward

Scenario: Net capital losses after all netting = $12,000 for the tax year. You can deduct $3,000 against ordinary income this year (or $1,500 if married filing separately). The remaining $9,000 is carried forward to future years indefinitely until used. Next year, you might have gains that can be offset by the carried forward loss.

Recordkeeping and Practical Steps

Good records are essential. Keep the following documents and details for each sale and purchase:

• Trade confirmations with dates and amounts.
• Cost basis records and any adjustments (reinvested dividends, splits, wash‑sale basis increases).
• Dates of purchase and sale to determine holding period (short vs long).
• Broker 1099‑B and year‑end statements summarising proceeds and basis reported.
• Records of transactions across accounts (taxable vs tax‑advantaged) that could trigger wash‑sale rules.

Practical steps:

1. Review realised gains and losses periodically during the year — year‑to‑date monitoring can prevent surprises and enable strategic harvesting.
2. Use broker tax tools or portfolio software to track basis and potential wash‑sale flags. If you trade on Bitget, use Bitget’s tax and reporting tools and Bitget Wallet to consolidate records where available.
3. Plan sales with wash‑sale windows in mind; if avoiding the wash‑sale rule, wait 31 days to repurchase the same security or use a non‑substantially identical replacement.

Common Pitfalls and Warnings

Common mistakes include:

• Triggering wash sales unintentionally by repurchasing the same security too soon or across different accounts (including IRAs).
• Failing to account for basis adjustments when reinvesting dividends or after corporate actions (splits, mergers).
• Misunderstanding carryforward rules — carryforwards do not expire but must be tracked and reported correctly on future returns.
• Relying on losses in tax‑advantaged accounts to offset taxable gains — losses inside IRAs/401(k)s generally aren’t deductible for taxable accounts.
• Underestimating state tax differences; assuming every state follows federal rules can be incorrect.

Avoid trying to time the market mainly for tax reasons; tax‑aware investing should be one factor among many, not the sole driver of trading decisions.

When to Get Professional Help

Consult a CPA, tax attorney, or qualified tax advisor when you have complex situations: large gains or losses, cross‑border tax issues, significant transactions in multiple accounts (taxable and retirement), complicated basis histories, or when new and unsettled topics arise (for example, uncertainty about wash‑sale application to certain digital assets). A tax pro can help apply rules correctly and model future tax impacts.

References and Further Reading

Authoritative sources and helpful guidance include IRS Topic No. 409, the instructions for Form 8949 and Schedule D, and tax‑education pages from major financial institutions. As of 2026-01-18, according to IRS Topic No. 409 and Form 8949/Schedule D instructions, the netting rules, $3,000 ordinary income deduction limit, and wash‑sale rules remain standard guidance for federal tax reporting. Additional practical guidance is available from broker and advisor resources and reputable tax‑education sites.

Sources cited for context and policy as of publication:

• IRS Topic No. 409; Form 8949 and Schedule D instructions — official IRS guidance (reported as of 2026-01-18).
• Tax‑education materials from major advisory firms and brokerages summarising capital gains/losses and wash‑sale rules (reported as of 2026-01-18).

See Also

• Capital gains tax rates
• Tax‑loss harvesting
• Wash‑sale rule
• Form 8949
• Schedule D
• Net Investment Income Tax (NIIT)

Practical Closing Notes

If your core question is “can i offset stock gains with losses”, the concise answers are: yes — realised capital losses can offset realised capital gains through the IRS netting process; limited amounts (up to $3,000) can reduce ordinary income; and excess losses carry forward indefinitely. Be mindful of holding periods, the wash‑sale rule, and special cases involving retirement accounts and crypto.

For traders and investors looking for an integrated trading and recordkeeping experience, consider executing trades on Bitget and using Bitget Wallet for custody and record consolidation. Regularly review transactions, maintain clear records, and consult a tax professional for personalized advice.

Further explore Bitget features to manage trades and tax reporting needs — learn how Bitget supports portfolio tracking and recordkeeping to make tax season smoother.

As of 2026-01-18, according to IRS Topic No. 409 and Form 8949/Schedule D guidance, the rules summarized above reflect current federal treatment; state rules and specialized asset classes may differ — consult official sources or a tax professional for your specific situation.