can you roll over stock losses?

Can You Roll Over Stock Losses?

Short answer up front: can you roll over stock losses? Yes — for U.S. federal income tax purposes, realized capital losses can be carried forward (rolled over) into future tax years to offset capital gains and up to $3,000 of ordinary income each year ($1,500 if married filing separately). This article explains the how, who it applies to, the paperwork, limitations (including the wash sale rule), examples, best practices like tax‑loss harvesting, special notes for cryptocurrencies and non‑stock assets, state and international considerations, and when to seek professional help.

As of January 21, 2026, according to IRS Topic No. 409 and Schedule D instructions, the federal rules described here remain the baseline for capital loss carryforwards. This guide is informational and not tax advice—consult a tax professional for situations involving large or complex positions.

Note for Bitget users: if you trade crypto or other digital assets through Bitget or use Bitget Wallet, many of the capital‑loss carryforward principles described here apply when you realize losses on property treated as capital assets.

Definition and basic concept

can you roll over stock losses? To answer that fully, first define the core terms:

• Capital loss: A capital loss occurs when you sell a capital asset—such as a stock, bond, or other investment property—for less than your adjusted basis (what you paid plus adjustments). Capital losses reduce taxable income according to tax rules.
• Realized loss: A realized loss is created when a transaction is completed (e.g., you sell shares); unrealized or “paper” losses (positions that have declined in market value but haven’t been sold) are not deductible and cannot be carried forward until realized.
• Carryover / Carryforward: A carryover (or carryforward) is an unused tax benefit that is applied in later tax years. For capital losses, any net loss that cannot be used fully in the current tax year is carried forward to future years until it is used up.

Key distinction: unrealized losses cannot be carried forward. Only realized capital losses that are properly reported and not disallowed (see wash sale and other rules) can become carryovers.

How capital loss carryovers work

Understanding the mechanics helps answer the practical question: can you roll over stock losses, and how will they reduce future tax bills? The process follows a stepwise order defined in federal tax rules:

1. Categorize gains and losses by holding period

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

2. Net short‑term and long‑term separately

   • Compute total short‑term gains and total short‑term losses; net them to get net short‑term gain or loss.
   • Do the same separately for long‑term gains and losses.

3. Offset across categories if needed

   • If you have a net short‑term loss and a net long‑term gain (or vice versa), net those results against each other. The ordering matters because short‑term gains are taxed differently than long‑term.

4. Use losses to reduce capital gains

   • Realized losses are used to fully or partially eliminate realized capital gains for the year. Losses first offset gains (matching the categories as above), reducing taxable capital gain income.

5. Apply the $3,000 ordinary‑income offset rule

   • If total net capital losses exceed capital gains for the year, up to $3,000 of net loss ($1,500 if married filing separately) may be deducted against ordinary income (wages, interest, etc.) in that tax year.

6. Carry forward remaining unused losses indefinitely

   • Any net loss beyond that $3,000 limit is carried forward to the next tax year, where the same ordering and offset rules apply. There is no expiration for federal capital loss carryforwards: they continue until fully used.

Practical outcome: can you roll over stock losses? Yes — unused losses become carryovers that will reduce taxes in future years, subject to ordering rules and the annual $3,000 cap against ordinary income.

Tax forms and reporting

Reporting is essential to establish carryovers that the IRS recognizes. Typical forms and steps include:

• Form 8949: Report individual sales and dispositions of capital assets (date acquired, date sold, proceeds, cost basis, adjustments). Each sale is listed; adjustments such as disallowed wash sale amounts are entered as applicable.
• Schedule D (Form 1040): Summarizes capital gains and losses. Totals from Form 8949 feed into Schedule D, which performs the netting procedure (short‑term and long‑term) and calculates any deductible loss for the year.
• Capital Loss Carryover Worksheet: The Schedule D instructions include a worksheet to calculate the amount of capital loss carryforward to the next tax year (how much of last year's unused loss carries forward). This worksheet shows the components and lets you enter prior‑year carryover amounts on the current return.

Where carryovers appear on the return

• On Schedule D, there is a line for capital loss carryover from prior years. You will use the Capital Loss Carryover Worksheet (in the Schedule D instructions) to compute the precise amount to enter.

How to find prior‑year carryover amounts

• Prior‑year tax returns: the Schedule D and Capital Loss Carryover Worksheet from last year list the remaining carryover.
• Broker statements: brokers often report aggregated realized gains and losses for the year, but they do not compute federal carryovers — that computation lives in your tax return worksheets.
• Tax software: if you use tax preparation software, it typically carries the prior year’s Schedule D and carryover entries into the current year automatically.

Keep accurate records so the carryover is documented and easy to compute next year.

Examples

Example A — Year with only losses

• Scenario: In Year 1, you sell several stocks and realize a net capital loss of $11,000 (all transactions combined, after netting short‑term and long‑term categories).
• Step 1: There are no capital gains to offset, so you can apply up to $3,000 of the net loss against ordinary income on your Year 1 return.
• Step 2: The remaining $8,000 becomes a capital loss carryforward to Year 2.

Year 2: If you have $4,000 of capital gains and no other losses, the $8,000 carryforward first offsets the $4,000 of gains and then $3,000 of the leftover loss can be applied against ordinary income in Year 2. The remaining $1,000 carries into Year 3.

Example B — Using prior‑year carryover to offset current gains and ordinary income

• Year 1: Realized net capital loss = $10,000. You claim $3,000 against ordinary income; carryover = $7,000.
• Year 2: Realized capital gain = $6,000 (long‑term). Use the $7,000 carryover to fully offset the $6,000 gain; $1,000 remaining can be used against ordinary income in Year 2 (subject to the $3,000 cap, but here it is only $1,000). Carryover to Year 3 = $0.

These examples show the typical flow: use carryovers to eliminate gains first, then apply the remaining to ordinary income up to $3,000, and carry forward what remains.

Rules and limitations

Wash sale rule

One of the most common traps when trying to realize losses is the wash sale rule. The wash sale rule disallows a loss deduction if you (or your spouse or a controlled entity) buy a “substantially identical” security within the 30‑day period before or after the sale that produced the loss. Key points:

• 61‑day window: the rule covers purchases in the 30 days before the sale, the day of sale, and the 30 days after sale — a total window of 61 days around the sale date.
• Disallowed loss is not lost forever: the disallowed loss is added to the basis of the newly purchased shares, postponing the deduction until that replacement position is sold (assuming no further wash sales).
• Substantially identical: stocks in the same company are substantially identical; the test for mutual funds, ETFs, or options can be complex (consult guidance). For cryptocurrencies, whether the wash sale rule applies has been a debated topic — see the special considerations below.

Practical effect: if you inadvertently trigger a wash sale, you cannot deduct the loss in the tax year the sale occurred, which affects the amount you can carry forward that year. You must track disallowed losses and the adjusted basis of replacement shares carefully.

Short‑term vs. long‑term ordering and application

The ordering rules govern which gains are offset first:

• Long‑term losses offset long‑term gains first; short‑term losses offset short‑term gains first.
• If one category has an excess loss after offsetting its category gains, the excess is used against the other category.
• Because short‑term gains are taxed at ordinary income rates, short‑term losses used against them have relatively greater tax value than long‑term losses used against long‑term gains (which may be taxed at lower rates).

Knowing the ordering helps when planning tax‑loss harvesting or deciding which lots to sell.

Transactions that don’t qualify

Not every loss is deductible. Common non‑deductible situations include:

• Personal‑use property: losses on personal items (car sold at a loss, household goods) are not deductible as capital losses.
• Certain related‑party transactions: losses on transactions with related parties can be disallowed or subject to special rules.
• Basis adjustments and nonrecognition transactions: transactions that defer recognition (like certain exchanges or like‑kind exchanges when allowed) can change basis and defer losses.
• Losses on wash sales: as noted, those losses are disallowed until adjustments are made to basis.

Always review the tax code or consult a professional if a transaction is unusual.

Tax‑loss harvesting and practical strategies

Tax‑loss harvesting is the practice of realizing losses intentionally to offset gains (and potentially reduce ordinary income up to the annual limit). Common methods and considerations:

• Sell losing positions to realize losses: harvest losses to offset realized gains in the same tax year.
• Reinvest thoughtfully: to maintain market exposure, investors often reinvest proceeds into different securities that are not substantially identical (to avoid the wash sale rule) or use a short‑term buffer (hold for more than 31 days) before repurchasing.
• Use tax lots strategically: choose which lots to sell (short‑term vs. long‑term) to manage tax outcomes. Selling specific lots can alter the mix of short‑term and long‑term gains/losses.
• Portfolio rebalancing: harvesting can be combined with rebalancing to maintain desired asset allocation while realizing tax benefits.
• Beware of transaction costs and market timing: trading costs and the risk that a replacement security will move differently than the sold security are real tradeoffs.
• Monitor wash sale exposure closely: automated trading, frequent rebalancing, or reinvesting dividends can accidentally trigger wash sales if the replacement is substantially identical.

Tax‑loss harvesting can be particularly useful in high‑gain years to reduce capital gains tax or in years with large appreciated positions being trimmed. However, it requires accurate records and mindful implementation.

Special considerations for cryptocurrencies and other non‑stock assets

The IRS treats cryptocurrencies as property for U.S. federal tax purposes. That means many general capital gain/loss rules apply, but there are practical uncertainties:

• Property treatment: gains or losses on crypto transactions are capital gains or losses if the asset is a capital asset in the hands of the taxpayer. The same carryforward rules generally apply: realized losses can offset gains and up to $3,000 of ordinary income, with unused losses carried forward.
• Wash sale ambiguity: as of the reporting date in this article, the application of the wash sale rule to cryptocurrencies is unsettled in practice because wash sale rules historically reference “securities,” while crypto is treated as property. Some tax professionals advise caution by avoiding repurchases within 30 days, while others await clear IRS guidance. As of January 21, 2026, taxpayers should monitor official IRS guidance and consult a professional for crypto‑heavy trading.
• Token forks, airdrops, staking rewards: these events can create taxable events with complex basis and holding‑period rules. Losses tied to these activities may be subject to additional considerations.

If you use Bitget or Bitget Wallet to trade or manage crypto assets, maintain detailed records of acquisition dates, costs, and transactions so that realized losses and any potential carryovers can be reliably reported.

Interaction with state taxes and international issues

State tax treatment

• Not all states follow federal treatment for capital loss carryovers. Some states permit carryforwards under the same rules; others may limit or modify carryover amounts or treatment.
• File state returns carefully: carryover amounts for federal taxes may need adjustments for your state tax return.

Cross‑border taxpayers

• Nonresident aliens and U.S. citizens/residents with foreign investments face additional complexity. Treaties, foreign tax credits, and local tax rules can affect how losses are reported and whether they can be used to offset U.S. taxable income.
• Currency considerations: losses in foreign currency require translation to U.S. dollars using appropriate exchange rates, affecting basis and realized loss calculations.

If you have multi‑state or international exposures, seek specialized tax advice because general federal rules are only the starting point.

Common mistakes and recordkeeping

Frequent errors that lead to lost deductions or incorrect carryovers:

• Failing to actually realize the loss: holding a losing position does not produce a deduction until sold.
• Violating the wash sale rule: many investors unintentionally trigger wash sales when replacing positions or when multiple accounts are involved.
• Misclassifying holding periods: selling lots without tracking acquisition dates can lead to incorrect short‑term vs. long‑term classification.
• Not completing required worksheets: failing to compute the Capital Loss Carryover Worksheet means the IRS won’t see a formal calculation of carryover.
• Relying solely on broker statements: brokers report proceeds and basis, but final carryover computations happen on the tax return.

Recordkeeping recommendations

• Keep complete trade-level records: dates acquired, dates sold, proceeds, cost basis, commissions, and lot identification.
• Maintain prior‑year tax returns and Schedule D worksheets: the carryover computation is often on the prior year’s Schedule D or the worksheet.
• Save broker year‑end statements and 1099‑B forms: these provide supporting documentation for reported sales.

Good records reduce audit risk and make future carryover computations straightforward.

When to seek professional help

Consider a tax advisor when:

• Losses and gains are large or complex: significant realized losses require careful planning and documentation.
• Frequent wash‑sale exposures: active traders, cross‑account trading, or algorithmic strategies can create complex wash‑sale chains.
• Multi‑state or international holdings: different jurisdictions create complex interactions.
• Crypto activity is substantial: token events, staking, forks, and heavy trading can create complex tax profiles.

This article is informational and does not constitute tax advice. For complex situations, a certified tax professional or CPA can provide tailored guidance and help compute carryovers accurately.

References and further reading

Authoritative sources and recommended practical guides:

• IRS Topic No. 409, Capital Gains and Losses (referenced for general federal rules). As of January 21, 2026, IRS publications and Schedule D instructions remain the primary federal references.
• IRS Form 8949 and Schedule D instructions (use the Capital Loss Carryover Worksheet included in Schedule D instructions).
• Practical guides on tax‑loss harvesting and carryforwards from well‑known financial education sites and broker tax centers.

Sources: As of January 21, 2026, according to IRS Topic No. 409 and Schedule D instructions.

Final notes and next steps

can you roll over stock losses? Yes — realized capital losses can be carried forward indefinitely under federal rules: they first offset capital gains, then up to $3,000 per year can reduce ordinary income, and unused amounts continue as carryovers. To make the most of carryforwards, maintain careful records of realized losses, understand wash sale interactions, use the correct forms (Form 8949 and Schedule D), and consider tax‑loss harvesting strategies where appropriate. For cryptocurrency traders using Bitget or Bitget Wallet, treat crypto transactions as property for carryover purposes and stay alert for evolving IRS guidance on wash sales and other crypto tax matters.

If you want to explore trading or wallet options where accurate transaction histories can be kept for tax reporting, consider Bitget and Bitget Wallet to consolidate records and support clearer tax reporting. For complex tax situations, engage a licensed tax advisor.

Explore more Bitget resources to help manage your trading records and understand how realized gains and losses affect your tax picture.