Can You Deduct Stock Purchases? Tax Guide

Can You Deduct Stock Purchases?

As a U.S. investor, one common question is: can you deduct stock purchases? This article answers that question clearly and walks through the tax concepts, reporting requirements, and practical strategies you should know. Whether you trade equities, hold cryptocurrency treated as property, or use Bitget for trading and custody, you'll learn when costs matter for tax purposes, what you can and cannot deduct, and how to document transactions for IRS reporting.

截至 2026-01-21，据 IRS Publication 550 and IRS Topic No. 409 reported guidance, buying investment property (including stocks and cryptocurrencies treated as property) is not an immediate deduction — tax consequences generally arise when you sell or otherwise dispose of the asset.

Short answer

No — buying stocks (the purchase price) is not deductible as an expense on your tax return. You can deduct realized capital losses (subject to limits), and certain investment-related expenses (for example, investment interest expense) can be deductible under separate rules. This article explains how those rules work and what forms you will use to report transactions.

Why this matters: can you deduct stock purchases?

If you search for "can you deduct stock purchases," you’ll find that many investors confuse transaction costs, investment interest, and realized losses. This guide clarifies those differences, explains timing and limits (including the wash sale rule), and provides examples of how tax outcomes are calculated. If you use Bitget or Bitget Wallet, keeping accurate cost-basis and trade records simplifies reporting and supports correct tax treatment.

Key tax concepts

Understanding a few core tax concepts makes it easier to answer "can you deduct stock purchases?" correctly. Below are definitions and why they matter.

• Capital asset: Most stocks and cryptocurrencies (when treated as property) are capital assets for tax purposes. Gains or losses on their sale are capital gains or capital losses, not ordinary business expenses.
• Adjusted basis: Your adjusted basis generally starts with the purchase price and includes commissions, fees, and other acquisition costs. Adjusted basis is used to compute gain or loss on a sale.
• Realized vs. unrealized gain/loss: A gain or loss is realized only when you sell or otherwise dispose of the asset. Paper (unrealized) losses do not produce a deductible loss.
• Holding period: Determines whether a capital gain or loss is short-term (held one year or less) or long-term (more than one year), which affects tax rates that apply to gains and how losses offset gains.

Adjusted basis and purchase price

When investors ask "can you deduct stock purchases," the key point is that the amount you pay to buy a stock (including commissions and fees) becomes your cost basis. You do not deduct this purchase when you make it. Instead, the purchase price plus allowable additions becomes your adjusted basis and is subtracted from the sale proceeds when you sell to determine gain or loss.

Example: You buy 100 shares for $10,000 and pay $50 in commission. Your initial basis is $10,050. If you later sell those shares for $9,000 (net of selling commission), your realized loss equals $1,050.

Realized vs. unrealized losses

Only realized losses can be recognized for tax purposes. A drop in market value that is not realized by a sale (a paper loss) does not create a tax deduction. This distinction answers the core of "can you deduct stock purchases": no deduction exists at purchase or while the position is merely underwater unless you dispose of it in a tax-recognized way.

Capital gains and losses: types and tax rates

• Short-term capital gains/losses: Results from assets held one year or less. Short-term gains are taxed at ordinary income tax rates.
• Long-term capital gains/losses: Results from assets held more than one year. Long-term gains are taxed at preferential capital-gains rates (0%, 15%, or 20% for most taxpayers, depending on taxable income), with potential surtaxes (for example, the 3.8% Net Investment Income Tax) applying in certain circumstances.

Losses first offset gains of the same type. Netting rules: short-term losses offset short-term gains, long-term losses offset long-term gains. After netting within categories, any remaining net loss offsets the other category. The final net capital loss can offset up to $3,000 ($1,500 married filing separately) of ordinary income per year, with any unused loss carried forward indefinitely.

Limits on capital loss deductions and carryovers

If you realize more capital losses than gains in a tax year, you can deduct up to $3,000 of net capital losses against ordinary income each year ($1,500 if married filing separately). Excess losses carry forward to future tax years until fully used. This is a primary way investors recover tax benefit from losses, but it requires realized losses — again answering "can you deduct stock purchases?" in the negative for purchases alone.

Wash sale rule and its effect on deductions

The wash sale rule disallows a loss deduction if you buy the same or a substantially identical security within 30 days before or after selling it at a loss. Disallowed losses are not lost forever; instead, the disallowed amount is added to the basis of the repurchased shares, effectively deferring the deduction until the replacement shares are disposed of in a non-wash-sale transaction.

Practical points on wash sales:

• The 61-day window includes 30 days before the sale, the day of the sale, and 30 days after the sale.
• The rule applies to substantially identical securities — for stocks, this typically means the same ticker. For options and certain crypto or funds, the determination can be complex.
• Related-party purchases and IRA purchases may trigger wash-sale treatment.

Investment interest expense vs. purchase cost

Investors sometimes ask if borrowing to buy a stock or the cost of purchase is deductible. The purchase itself is not deductible. However, interest on money borrowed to buy taxable investments (investment interest) can be deductible, subject to limits.

Key features of investment interest expense:

• Investment interest is deductible only to the extent of net investment income for the year (interest income, ordinary dividends, and short-term capital gains that are not taxed at preferential rates). Excess interest carries forward to future years.
• To claim the deduction, taxpayers generally file Form 4952 (Investment Interest Expense Deduction) to calculate the allowed deduction.
• Interest on margin accounts used to buy securities is often considered investment interest.

Note: Investment interest deduction does not apply to interest on money borrowed to buy tax-advantaged investments or property used in a trade or business; special rules may apply.

Reporting transactions and forms

Accurate reporting is essential. Key forms and schedules include:

• Form 8949: Reports sales and other dispositions of capital assets. Use Form 8949 to reconcile amounts reported on broker 1099-Bs with amounts you report (for example, if cost basis is missing or adjustments apply).
• Schedule D (Form 1040): Summarizes capital gains and losses and carries totals to Form 1040.
• Form 4952: Used to calculate the allowable investment interest expense deduction.

Broker-provided 1099-B statements and year-end cost-basis reporting are central to filing correctly. Keep trade confirmations and records that document acquisition dates, purchase prices, commissions, and wash-sale adjustments.

Special situations and exceptions

Several situations alter ordinary treatment or require special handling when asking "can you deduct stock purchases?"

• Worthless securities and abandoned securities: If a security becomes totally worthless during the tax year, the IRS treats it as sold on the last day of the tax year, allowing a capital loss deduction. This is different from recognizing a bad-debt deduction.

• Gifts and inherited stock: Gifted stock carries the donor’s basis in some cases, while inherited stock receives a stepped-up basis to fair market value at date of death (or alternate valuation date if applicable). Different holding-period rules apply for inherited assets.

• Related-party transactions: Sales to or from related parties may have special nondeductibility rules or timing differences.

• Securities held in employer plans or tax-advantaged accounts (IRAs, 401(k)s): Gains and losses within tax-advantaged accounts are generally not reported on Form 1040 and are not deductible on your individual return. Withdrawals or distributions generate taxable events subject to retirement-plan rules.

• Trader in securities vs. investor status: Traders who meet IRS criteria for trader tax status may be able to deduct certain expenses differently and elect mark-to-market accounting under Section 475(f), which changes timing and character of gains and losses. This treatment is complex and may alter whether losses are ordinary or capital.

• Cryptocurrency treated as property: Digital assets treated as property by the IRS follow capital gain and loss rules on sale or exchange. The same rules about realized losses, basis, and wash sales (note: IRS has taken the position that wash-sale rules can apply to crypto in certain cases) may apply. Use Bitget Wallet records to document acquisitions and dispositions.

Worthless securities

When a security becomes completely worthless within a tax year, the IRS treats the asset as if sold on the last day of the tax year, allowing a capital loss deduction. You cannot normally claim a bad-debt deduction for a worthless stock; the proper treatment is a capital loss.

Example: If a stock becomes worthless during 2025, you may claim the loss on your 2025 return, treated as sold on December 31, 2025.

Tax-loss harvesting and year‑end timing

Tax-loss harvesting is the practice of selling investments at a loss to realize a tax-deductible loss that can offset gains or up to $3,000 of ordinary income. Key rules:

• To count for a tax year, you must complete the sale (i.e., the transaction must settle) within that calendar year — generally by December 31.
• Be mindful of the wash sale rule when repurchasing the same or substantially identical securities.
• Consider timing between realizing losses and recognizing gains to maximize tax benefit and preserve your desired asset allocation.

Example: If you have a $5,000 realized long-term capital gain and you sell other holdings to realize $6,000 in losses, your net capital loss for the year is $1,000; after offsetting the gain, no capital gains tax is due, and you still have a $0 ordinary income offset beyond the netting. Excess loss beyond gains can offset up to $3,000 of ordinary income and carry forward the remainder.

Interaction with qualified dividends and elections

Qualified dividends receive preferential tax rates similar to long-term capital gains. In limited situations, taxpayers can make elections (or face circumstances) that affect how investment income is characterized for purposes of the investment interest expense deduction. For example, treating certain investment income as ordinary income can increase allowable investment interest deduction, but elections can be complex and sometimes irreversible — consult a tax professional before making elections that impact character of income.

Examples

Example A — No deduction for a purchase (unrealized loss):

• You buy 100 shares for $20,000 on March 1.
• By December 1 the market value is $14,000, but you do not sell.
• Result: No tax deduction in that year for the $6,000 decline; the loss is unrealized.

Example B — Realized capital loss and $3,000 limit:

• You buy 100 shares for $20,000 and later sell them for $14,000, realizing a $6,000 long-term loss.
• You have no capital gains in the year. You can deduct $3,000 against ordinary income this year, and carry forward $3,000 to future years.

Example C — Wash sale disallowance and basis adjustment:

• You own 100 shares bought at $10,000. You sell all 100 shares at $7,000, realizing a $3,000 loss on December 15. On December 20, you buy 100 shares of the same stock for $7,200.
• The loss is disallowed due to the wash sale rule. The $3,000 disallowed loss is added to the basis of the new shares, giving them an adjusted basis of $10,200 ($7,200 + $3,000). The loss is effectively deferred until you sell the replacement shares in a transaction that is not a wash sale.

State and international differences

State tax rules often follow federal treatment for capital gains and losses, but there are differences across states. Some states may not recognize federal exclusions or may tax capital gains differently. Non-U.S. residents and foreign-source investments involve additional rules and possible withholding by brokers or foreign payers.

If you trade or hold assets on platforms like Bitget and you have cross-border tax exposure, consult a tax professional familiar with multi-state and international tax rules.

Recordkeeping and documentation

Good records make tax reporting straightforward and defensible:

• Trade confirmations showing date, quantity, price, and commissions for each purchase and sale.
• Year-end broker statements and Form 1099-B (or equivalent) showing proceeds and cost-basis information.
• Records of wash-sale adjustments and any basis modifications.
• Documentation for gifts, inheritances, or corporate actions (splits, mergers, spin-offs) that affect basis.

If you use Bitget or Bitget Wallet, maintain downloaded transaction histories and confirmations to reconcile with your tax reporting.

Official guidance and further reading

Primary authoritative sources include:

• IRS Publication 550, Investment Income and Expenses — covers capital gains and losses, basis, and investment interest.
• IRS Topic No. 409, Capital Gains and Losses — summary guidance on gains and losses.
• IRS FAQs and notices on wash sales and worthless securities.

Secondary resources that explain and illustrate common situations include materials from major tax-preparation providers and personal-finance educators. As of 2026-01-21, the IRS materials remain the primary legal authority for U.S. federal tax treatment.

When to consult a tax professional

Contact a CPA or tax attorney if you face complex situations: large or concentrated losses, frequent trading with potential wash-sale issues, margin loans and investment-interest interactions, trader-status elections, tax-advantaged account conversions, multi-state or international tax exposure, or intricate crypto positions. This article is informational and not tax advice; a qualified professional can apply rules specifically to your circumstances.

Practical checklist: What to do now

• If you wonder "can you deduct stock purchases," remember that purchases are not deductible — focus on realized gains and losses.
• Keep meticulous records of purchases, sales, commissions, and fees; these affect adjusted basis.
• Track holding periods; they determine short- vs. long-term treatment.
• Monitor wash-sale windows if you practice tax-loss harvesting.
• Use Form 8949 and Schedule D to report sales, and Form 4952 to claim investment interest expense where applicable.
• If you trade on or custody assets with Bitget, download transaction histories and use Bitget Wallet for consolidated records.

Examples recap with numbers (quick reference)

• Paper loss only: Buy $10,000; value falls to $7,000; no deduction until sale.
• Realized loss: Buy $10,000; sell for $7,000; $3,000 loss realized; $3,000 may offset ordinary income up to the annual limit; excess carries forward.
• Wash sale: Realized $1,000 loss but repurchased within 30 days; loss disallowed and added to new basis.

Further notes on cryptocurrencies

Cryptocurrencies treated as property follow capital gain/loss rules on sale, exchange, or spending. The same principle answers "can you deduct stock purchases" for crypto: merely buying or holding crypto is not deductible. Realization events (selling crypto for fiat, swapping crypto, or using crypto to buy goods and services) create taxable events. Maintain detailed acquisition and disposition records, especially for assets held across wallets or exchanges — Bitget Wallet helps centralize records.

Reporting nuances and common errors

Common mistakes taxpayers make include:

• Expecting unrealized losses to be deductible.
• Failing to account for commissions or fees in basis calculations.
• Overlooking wash-sale adjustments when repurchasing similar securities.
• Not reconciling broker 1099-Bs with personal records, especially when brokers report missing basis.

Accurate reconciliation reduces audit risk and ensures correct tax liability.

Bitget notes and platform reminders

If you use Bitget for trading or custody, export transaction histories and keep confirmations. Bitget Wallet can simplify recordkeeping for assets you control. Bitget provides tools to view realized P&L and transaction logs that help prepare Forms 8949 and Schedule D.

As of 2026-01-21, platform reporting and brokerage statements remain critical for tax compliance, and you should retain records at least as long as the statute of limitations for tax adjustments.

When the rules change

Tax rules can change through legislation and IRS guidance. Stay current with IRS publications (Publication 550, Topic No. 409, and related notices). As of the stated reporting date, IRS guidance continues to treat purchases as non-deductible and reserves deductibility for realized losses or separate enumerated deductions such as allowable investment interest.

More on recordkeeping and audit preparation

Maintain a clear audit trail:

• Keep original trade confirmations and year-end statements.
• Maintain explanations for basis adjustments (corporate actions, dividends reinvested, stock splits).
• If you claim a worthless-security loss, retain documentation supporting worthlessness.

If the IRS requests substantiation, comprehensive records greatly reduce time and uncertainty.

Final practical guidance: next steps for investors

If you asked "can you deduct stock purchases," now you know purchases themselves are not deductible. Take these steps:

• Reconcile your current year’s buys and sells and identify realized gains and losses.
• Consider tax-loss harvesting before year-end, but avoid wash-sale traps.
• Track investment interest costs separately and prepare Form 4952 if applicable.
• Use Bitget Wallet and Bitget account reports to centralize records and export data for tax preparation.

Further explore Bitget’s resources and tools to help with trade records and custody. For complex tax situations, engage a qualified tax advisor to evaluate elections, trader status, or multi-jurisdictional filings.

References (primary sources used)

• IRS Publication 550, Investment Income and Expenses (primary guidance on capital gains, losses, and investment interest).
• IRS Topic No. 409, Capital Gains and Losses (summary guidance).
• IRS FAQs and official notices on wash sales and worthless securities (see IRS guidance as updated through 2026-01-21).
• Practical explanations and how-to content from recognized tax-preparation and personal-finance educators (used to illustrate common scenarios).

Further assistance

If you want a tailored summary using your actual trades from Bitget or Bitget Wallet (for example, a pre-fill checklist for Form 8949), consider exporting your transaction history and consulting a tax professional. Explore Bitget’s help center for guidance on exporting trade and wallet histories.

More resources and tools are available through your tax advisor and official IRS publications; this article is informational and not a substitute for professional tax advice.