can i write off my stock losses?

Can I write off my stock losses?

As an investor, you may ask: can i write off my stock losses? Short answer: yes — but only for realized losses in taxable accounts, and subject to netting rules, limits, wash‑sale restrictions, and specific reporting requirements. This article explains how the rules work, how to calculate losses, how losses offset gains and ordinary income, how to report them on tax forms, and practical steps (including tax‑loss harvesting) while highlighting common pitfalls.

As of 2026-01-21, according to IRS Topic No. 409 and guidance from well‑known tax resources, realized capital losses on taxable investment accounts are generally deductible against capital gains and, up to limits, against ordinary income; unrealized losses and losses inside most tax‑advantaged retirement accounts are not deductible.

Key concepts

Before answering can i write off my stock losses, you need to understand several fundamental terms:

• Realized loss vs. unrealized loss: A realized loss occurs when you sell a stock for less than your adjusted basis. An unrealized loss (a "paper" loss) occurs when a position’s market value falls but you haven’t sold — unrealized losses cannot be deducted.
• Capital asset: Stocks are typically "capital assets" for tax purposes; gains and losses on capital assets follow capital gains and losses rules.
• Adjusted basis: Generally your cost basis (purchase price) plus commissions, fees, and certain adjustments (stock splits, return of capital). Adjusted basis is used to compute gain or loss: proceeds minus adjusted basis = gain (or loss).
• Proceeds: Gross sales proceeds from the sale of the stock, before commissions.
• Holding period: The time between purchase and sale determines whether a capital gain or loss is short‑term (one year or less) or long‑term (more than one year).

Understanding these concepts is essential to answering the question can i write off my stock losses and to completing the required tax forms correctly.

Realized vs. unrealized losses

Only realized losses — losses locked in by selling the security — can be claimed on your U.S. federal tax return. If a stock you own declines in value but you haven’t sold, that unrealized loss is not deductible. Realization is generally required to create a deductible loss.

This distinction explains why investors sometimes sell losing positions late in the year to "realize" losses for tax purposes (tax‑loss harvesting) or delay sales if they expect a recovery.

Adjusted basis and how to compute a loss

To compute a capital loss you need your adjusted basis and sales proceeds:

• Adjusted basis commonly equals your purchase price plus commission and fees. It may be adjusted for stock splits, reinvested dividends, or corporate actions.
• Capital loss = Adjusted basis − Sales proceeds (if the result is positive, it’s a loss).

Example: You bought 100 shares at $50/share plus $10 commission (basis = $5,010). You sold them at $30/share with $10 commission (proceeds = $2,990). Capital loss = $5,010 − $2,990 = $2,020.

Brokerage year‑end statements and trade confirmations usually list cost basis and proceeds; use those records when completing tax forms.

Classification: short‑term vs. long‑term

The holding period determines whether a realized capital gain or loss is short‑term or long‑term. The one‑year rule is simple:

• Short‑term: You held the stock one year or less. Short‑term gains are taxed at ordinary income tax rates; short‑term losses offset short‑term gains.
• Long‑term: You held the stock for more than one year. Long‑term gains receive preferential tax rates; long‑term losses offset long‑term gains.

Because short‑term and long‑term gains/losses are taxed differently, the tax code requires you to keep them separate when calculating net gain or loss.

How capital losses offset gains and income

When you ask can i write off my stock losses, the rules that determine how losses are applied are central:

1. Offset gains of the same type first (short‑term losses offset short‑term gains; long‑term losses offset long‑term gains).
2. If one type remains after those offsets, net the two categories against each other (short‑term net vs. long‑term net).
3. If your net result for the year is a net capital loss, you can use up to $3,000 ($1,500 if married filing separately) of that loss to reduce ordinary income on your federal return per year.
4. Any unused net capital loss beyond the $3,000 annual allowance carries forward indefinitely to future tax years until used.

These rules mean that realized capital losses can reduce or eliminate the tax on capital gains in the current year, and can modestly reduce ordinary income if losses exceed gains.

Netting order and examples

Netting follows a specific order. Brief numeric example:

• Short‑term gains this year: $5,000
• Long‑term gains this year: $2,000
• Short‑term losses realized: $3,000
• Long‑term losses realized: $6,000

Step 1: Offset short‑term gains with short‑term losses:

• Short‑term net = $5,000 − $3,000 = $2,000 (short‑term gain)

Step 2: Offset long‑term gains with long‑term losses:

• Long‑term net = $2,000 − $6,000 = −$4,000 (long‑term loss)

Step 3: Net short‑term and long‑term nets against each other:

• Combined net = short‑term $2,000 − long‑term $4,000 = −$2,000 (net capital loss)

Step 4: Apply annual ordinary‑income offset:

• You may deduct up to $3,000 of net capital loss vs. ordinary income. Here you have $2,000 net loss, so the full $2,000 reduces ordinary income.

If the net loss had been $10,000, you could deduct $3,000 this year and carry forward $7,000 to future years.

Annual limit against ordinary income (the "$3,000 rule")

For U.S. federal tax returns, if your net capital losses exceed your capital gains for the year, you can deduct up to $3,000 of that excess loss against ordinary income in the same tax year ($1,500 if married filing separately). The balance carries forward.

This rule is a common point of confusion when people ask can i write off my stock losses — you can, but only up to the stated annual limit against ordinary income.

Carryforward of unused losses

If your net capital loss for the year exceeds the $3,000 limit, you carry the unused portion forward indefinitely. Carryforwards are used in future years first to offset capital gains, and then up to $3,000 per year of any remaining loss against ordinary income.

Keep accurate records of carryforwards — Schedule D (and your tax software) will track amounts carried to future tax years.

Reporting and forms

To claim capital losses on a U.S. federal tax return you typically use two forms:

• Form 8949 (Sales and Other Dispositions of Capital Assets): Report each sale of a capital asset, with date acquired, date sold, proceeds, cost basis, adjustments (including disallowed wash‑sale losses), and gain/loss. Brokers send Form 1099‑B showing sales; you reconcile that data on Form 8949.
• Schedule D (Capital Gains and Losses): Summarizes totals from Form 8949 and calculates net short‑term and long‑term gains/losses, the $3,000 deduction limit, and carryforwards to future years. The net result flows to Form 1040.

Your brokerage’s Form 1099‑B will usually list proceeds and sometimes cost basis; however, verify the basis is correct, especially for older lots or if the broker lacked complete data.

If wash‑sale adjustments apply, the broker may report these adjustments on Form 1099‑B; you still must reflect the adjustment correctly on Form 8949.

Limitations and exceptions

Several important limitations and exceptions affect whether and how you can write off stock losses.

• Retirement accounts: Losses inside most tax‑advantaged retirement accounts (IRAs, 401(k)s) are not deductible. Gains and losses within these accounts do not appear on Form 8949 or Schedule D. Distributions or conversions have other tax treatments.
• Personal‑use property: Losses on personal use property (like a personal car for commuting) are generally not deductible.
• Insolvency/bankruptcy/worthless securities: Special rules apply when securities become worthless or when a company emerges from bankruptcy; documentation is required.
• Business or ordinary loss treatment: If the stock trading is part of a taxpayer’s trade or business (very rare and subject to strict rules), losses may be treated differently.
• Entity and pass‑through differences: Partnerships, S corporations, trusts, and estates have special rules for reporting capital gains and losses; partnerships and S‑corps pass items through to owners with specific reporting.

When you consider can i write off my stock losses, verify whether any of these exceptions apply to your situation.

Worthless securities

If a security becomes totally worthless during the tax year, the loss can be treated as occurring on the last day of the tax year and deducted as a capital loss equal to your basis, subject to standard netting rules. Proving worthlessness requires documentation (company liquidation records, bankruptcy filings, trading suspension notices). The IRS scrutinizes worthless‑security claims, so keep thorough evidence.

Losses in tax‑advantaged accounts

Losses inside IRAs and employer plans (e.g., 401(k)) are not deductible. If you buy the same security in a taxable account and a retirement account within the wash‑sale 30‑day window, special rules can disallow a deduction without giving you an adjusted basis in the retirement account — a trap for some taxpayers.

Wash sale rule

One of the most important restrictions when you try to write off stock losses is the wash sale rule.

• A wash sale occurs when you sell a security at a loss and within 30 days before or after that sale you buy substantially identical stock or securities (including in IRAs or other accounts you control).
• If the wash‑sale rule applies, the loss on the sale is disallowed for current deduction. Instead, the disallowed loss is added to the basis of the repurchased security, effectively deferring the loss until that replacement position is ultimately sold.

When investors ask can i write off my stock losses, wash sales are a frequent reason a loss cannot be deducted immediately.

Practical implications of wash‑sale

Common scenarios that trigger wash‑sale treatment:

• Selling shares of Company X at a loss, then buying Company X within 30 days before or after the sale.
• Selling shares of an ETF that tracks a sector at a loss and buying another ETF that the IRS deems "substantially identical" within the 30‑day window.
• Reinvested dividends that automatically buy shares within the 30‑day window can create wash‑sale issues if you sold shares at a loss around the dividend date.

The wash‑sale rule applies to purchases in all your taxable and, in some cases, tax‑advantaged accounts, which makes tracking purchases across accounts important.

Wash‑sale and retirement accounts (IRA wash‑sale issues)

A particularly tricky situation: if you sell a security at a loss in a taxable account and within 30 days buy the same or substantially identical security in an IRA you own (including Roth IRAs), the loss is disallowed and added to the basis of the IRA holding — but because IRAs don’t track basis in the same way, you effectively lose the tax benefit unless you later take a distribution that recognizes that basis. The bottom line: avoid repurchasing the same security in an IRA within the 30‑day window if you want to realize the loss.

Tax‑loss harvesting

Tax‑loss harvesting is the deliberate realization of losses to offset gains or to use the $3,000 annual ordinary‑income offset. It is commonly used late in the year but can be used anytime.

• Goal: realize losses to reduce current tax on gains or to take the $3,000 ordinary‑income offset; then replace market exposure with a different instrument to maintain your investment strategy.
• Risks: Market timing risk, wash‑sale violations, transaction costs, and potential change in portfolio risk profile when replacing securities.

When doing tax‑loss harvesting, be mindful of the wash‑sale rule and of long‑term investment objectives. Tax considerations should not drive investment decisions in a way that increases risk or deviates from your plan.

Replacements and "substantially identical" considerations

To avoid wash sales while maintaining market exposure, investors often buy ETFs or funds that are not "substantially identical" but have similar exposures. The IRS has not published an exhaustive list of what counts as substantially identical, so use caution:

• Acceptable replacements often include broad index ETFs/funds that are not direct clones of the sold security.
• Avoid buying the exact same ticker or an ETF that tracks the identical index provided by the same issuer if you sold that exact ETF at a loss.
• If in doubt, wait 31 days after the sale to repurchase the exact same security or choose a different instrument that clearly differs in holdings or issuer.

Special topics and complications

Several additional topics commonly arise when investors consider can i write off my stock losses.

• Mutual funds and capital gains distributions: If you hold a mutual fund and it distributes capital gains, realized losses in other holdings can offset those distributions. Be careful with mutual fund share lots and timing.
• Options transactions: Gains and losses from options, depending on how they are closed, may be short‑term and subject to special rules. Complex option strategies may require professional help to report correctly.
• Short sales and margin accounts: Short‑sale gains/losses and constructive sale rules have specific tax treatments.
• Bankruptcy and worthless stock nuances: As noted earlier, worthless stock treatment requires documentation; partial worthlessness claims are more complicated.
• State tax treatment: States vary in how they treat capital losses and carryforwards; your state tax code may differ from federal rules.

When assessing can i write off my stock losses, remember state taxes may change the effective benefit.

Cryptocurrency and write‑offs (brief note)

For U.S. federal tax purposes, the IRS treats most cryptocurrencies as property. This means that capital gains and losses rules generally apply to crypto sales and trades similarly to stocks:

• Realized gains/losses when you sell or exchange crypto are reportable.
• Wash‑sale applicability to crypto has been debated; as of 2026-01-21 the IRS had not issued comprehensive, crypto‑specific wash‑sale guidance analogous to securities rules, so taxpayers should proceed cautiously and consider professional advice.

Because crypto tax rules and enforcement evolve, confirm the latest IRS guidance and consider consulting a tax pro for complex crypto situations.

Recordkeeping and documentation

Good records are essential when you ask can i write off my stock losses. Keep:

• Trade confirmations and brokerage year‑end statements (showing dates, proceeds, and cost basis)
• Form 1099‑B and other broker reporting
• Documents supporting adjustments to basis (fees, commissions, reinvested dividends)
• Evidence for worthless securities (bankruptcy filings, liquidation reports, exchange suspension notices)
• Records of purchases across accounts to detect potential wash‑sale interactions (taxable & retirement accounts)

Retain records for at least three years after filing (longer if you have carryforwards or special situations). Some taxpayers keep investment records until carryforwards are exhausted plus several years.

Examples and sample calculations

1. Offsetting gains with losses

• You sold Stock A (long‑term) for a $10,000 gain.
• You sold Stock B (short‑term) for a $6,000 loss.
• Result: Short‑term loss $6,000 offsets short‑term gains (none), then nets against long‑term gains: Combined net = $10,000 long‑term gain − $6,000 short‑term loss = $4,000 taxable gain. The classification affects the tax rate.

1. Applying the $3,000 deduction and carryforward

• Year net capital loss = $12,000.
• Year deduction vs ordinary income = $3,000 (current year).
• Carryforward to next year = $9,000 (applied first to gains in future years, then up to $3,000 vs ordinary income each year).

1. Effect of a wash sale on basis

• Buy 100 shares at $100 = Basis $10,000.
• Sell those 100 shares at $80 = Realized loss $2,000.
• Within 30 days, you repurchase 100 shares at $85. The $2,000 loss is disallowed and is added to the basis of repurchased shares: New basis = $8,500 + $2,000 = $10,500 (actual purchase cost $8,500 if commission excluded). When you later sell the replacement shares, that deferred amount affects future gain/loss calculation.

These examples show why tracking basis and wash‑sale adjustments is important.

When to consult a tax professional

Consider professional help if any of these apply:

• You have large or complex capital gains/losses or substantial carryforwards.
• You trade options, derivatives, or use short‑sale strategies.
• You have multi‑account activity creating potential wash‑sales (including IRAs).
• Your situation involves international or cross‑border tax issues.
• You claim worthless securities or complex corporate‑action adjustments.

A qualified advisor can help ensure correct reporting and optimize tax outcomes within legal limits. This article is informational and not individualized tax advice.

See also

• Capital gains
• Schedule D (Form 1040)
• Form 8949
• Tax‑loss harvesting
• Wash sale rule (IRS guidance)
• IRS Topic No. 409

References and authoritative sources

Authoritative sources include IRS Topic No. 409 and IRS publications relevant to capital gains and losses; major tax software and financial publishers provide accessible guidance (for example, TurboTax, Bankrate, Fidelity, Investopedia). State tax rules may differ.

As of 2026-01-21, the IRS remains the primary source for rule text and updates. For the latest rules relevant to your tax year, consult IRS publications and a qualified tax professional.

Final notes and next steps

Can i write off my stock losses? In summary: yes, you can write off realized losses in taxable accounts to offset capital gains and, up to $3,000 per year, ordinary income, subject to netting rules, the wash‑sale rule, and reporting requirements. Unrealized losses and losses inside most tax‑advantaged retirement accounts are generally not deductible. Keep accurate records, watch for wash‑sale traps (especially across accounts), and consult a tax professional for complex situations.

If you trade or hold crypto, remember the IRS treats crypto as property for tax purposes — similar capital‑loss rules generally apply, though wash‑sale guidance for crypto remains less definitive.

For investors who trade, a secure and compliant platform matters. Explore Bitget for trading and custody solutions, and consider Bitget Wallet if you need a Web3 wallet to manage digital assets securely. To learn more about keeping accurate records and how trading tools integrate with tax reporting, explore Bitget’s educational resources and wallet features.

Ready to dig deeper? Review your brokerage statements, identify realized losses you can use, and, if needed, consult a tax professional to confirm treatment and reporting before filing.