How long can you write off stock losses

How long can you write off stock losses

This guide answers the core question — how long can you write off stock losses — and explains definitions, netting rules, carryforwards, wash-sale effects, reporting, and practical strategies for investors, with Bitget-recommended tools for recordkeeping.

截至 2026-01-20，据 IRS Topic 409 和 Publication 550 报道，本指南汇总了关于资本损失记算与结转的联邦税务规则，并提供适用于股票与类似资产（包括多数加密货币作为财产）的实操建议。本文适合希望了解“how long can you write off stock losses”的初学者与中级投资者，帮助你在报税与税务筹划中更清楚地安排交易与记录。

Overview

Realized capital losses can offset realized capital gains in the year they occur. If net capital losses remain after offsetting gains, up to $3,000 ($1,500 if married filing separately) of net capital loss may be used to reduce ordinary income each tax year. Any unused net capital losses are carried forward to future tax years and can be used indefinitely until fully used. If you are asking "how long can you write off stock losses," the short answer is: you can carry unused net capital losses forward indefinitely, applying them against future gains and up to $3,000 per year of ordinary income each year.

how long can you write off stock losses — that core point appears throughout this guide so you can confidently plan tax-loss harvesting, reporting, and recordkeeping.

Key definitions

Capital loss vs. capital gain and when a loss is "realized"

• Capital gain: the amount by which the sale proceeds of a capital asset exceed your adjusted basis in that asset.
• Capital loss: the amount by which your adjusted basis exceeds your sale proceeds.
• Realized loss: a capital loss becomes "realized" when a completed sale or disposition occurs (for example, you sell shares for less than your basis). Unrealized losses (paper losses) do not provide a tax deduction until you realize them by selling or otherwise disposing of the asset.

If you wonder "how long can you write off stock losses" in the context of a loss that remains unrealized, remember that only realized losses can be written off; unrealized losses are not deductible.

Short-term vs. long-term losses

• Short-term: assets held one year or less (holding period ≤ 1 year).
• Long-term: assets held more than one year (holding period > 1 year).

Why it matters: short-term and long-term gains/losses are netted separately because they are taxed at different rates. The character (short- or long-term) of a loss follows the holding period up to the date of sale and affects how it nets with other gains.

Adjusted basis and realized loss calculation

• Adjusted basis generally equals purchase price plus commissions and fees, and adjusted for events such as stock splits, wash-sale basis adjustments, and return of capital.
• Realized loss per share = adjusted basis per share − sale proceeds per share (net of transaction costs).

Accurate basis records are essential. Brokers provide 1099-B reports, but you should confirm basis, holding periods, and any adjustments (e.g., wash-sale additions) before reporting.

How capital losses are applied (netting rules)

How losses are applied follows a defined order:

1. Short-term losses offset short-term gains first.
2. Long-term losses offset long-term gains first.
3. If either side remains, the net short-term and net long-term amounts are combined to yield a single net capital gain or loss for the year.

After netting:

• If you have a net capital loss for the year, you may deduct up to $3,000 of that loss against ordinary income on your federal return ($1,500 if married filing separately).
• Any excess net capital loss beyond the annual deduction limit is carried forward to future years.

This standard netting order is central when answering "how long can you write off stock losses" because it determines how much loss is available each year for ordinary-income offsets and how much must be carried forward.

How long you can write off losses (carryforward duration and limits)

• Indefinite carryforward: unused net capital losses carry forward indefinitely under current federal tax rules. Each carryforward loss retains its character as short-term or long-term for netting purposes in subsequent years.
• Annual mechanics: in each year after the loss is carried forward, the carried-forward loss is first used to offset that year’s capital gains (respecting short-term/long-term character), and then up to $3,000 of any remaining net loss can offset ordinary income.

Therefore, when people ask "how long can you write off stock losses," the practical answer is that you can keep using them year after year (indefinitely) until they are exhausted — first against gains, and then up to $3,000 per year against ordinary income.

Example of carryforward mechanics (high level)

• Year 1: $10,000 net capital loss -> deduct $3,000 vs. ordinary income; $7,000 carryforward.
• Year 2: $4,000 capital gains -> carryforward first offsets gains; $7,000 − $4,000 = $3,000 remaining -> deduct $3,000 vs. ordinary income; carryforward exhausted.

This illustrates that the carryforward can be fully used over multiple years and does not expire.

Special situations and treatment

Worthless stock and bankruptcy

• Totally worthless securities: the IRS treats a security that becomes totally worthless as if it were sold on the last day of the tax year for zero proceeds. The loss recognized equals your basis, and it is a capital loss.
• Bankruptcy situations: losses tied to bankruptcy or corporate liquidations may involve timing or characterization questions. If the security is truly worthless, you may claim a capital loss for that year.

If you ask "how long can you write off stock losses" arising from worthless securities, the same carryforward rules apply to any resulting net capital loss.

Losses in tax-advantaged accounts

• IRAs, 401(k)s, and similar qualified retirement accounts: losses inside these accounts are not deductible on your individual tax return and do not generate capital loss carryforwards.
• If you sell an asset at a loss inside such an account, the loss reduces the account’s value but provides no tax deduction.

Gifts and inheritances

• Gifts: the recipient’s basis generally carries over the donor’s basis (with special rules if fair market value at the time of the gift is lower and the donor’s basis exceeds FMV). Holding period also generally tacks for gains but may not for losses depending on FMV vs. basis.
• Inheritances: the beneficiary generally receives a stepped-up (or stepped-down) basis equal to the asset’s fair market value on the decedent’s date of death (or alternate valuation date). Loss recognition rules for inherited property differ and commonly lead to different tax outcomes.

These basis and holding-period rules can affect when and whether a loss is recognized and thus influence answers to "how long can you write off stock losses" for gifted or inherited positions.

The wash sale rule and its effect on writing off losses

What the wash sale rule is

• Wash sale rule: if you sell a security at a loss and buy a "substantially identical" security within 30 days before or after the sale (a 61-day window total), the loss is disallowed for tax purposes at that time.
• Instead of permitting an immediate deduction, the disallowed loss is added to the basis of the replacement shares, deferring the loss until the replacement shares are disposed of in a non-wash-sale manner.

This rule is critical when planning how and when you can write off stock losses. A wash sale can defer your deduction and thus affect how long losses are effectively carried forward.

Effect on timing

• Deferral, not elimination: wash sale treatment usually defers the loss rather than denying it permanently. The loss reappears as an added basis in the replacement shares and will be recognized when those shares are sold in a way that does not trigger another wash sale.
• Complex chains: repeated purchases and sales can create chains of basis adjustments; tracking can be complicated.

Scope and definition of securities

• The wash sale rule applies broadly to stocks and securities and often to options and contracts to acquire stocks. The rule also applies if a spouse or a controlled account purchases substantially identical securities within the wash-sale window.
• For tax and recordkeeping purposes, brokers report wash sales on cost-basis reports when they track identical securities, but not all replacement purchases are automatically identified by brokers.

When calculating "how long can you write off stock losses," you must consider wash-sale deferrals that can push loss recognition into later years.

Reporting losses on your tax return

Forms and statements

• Form 8949: used to report sales and dispositions of capital assets, showing dates, proceeds, cost basis, adjustments (including wash-sale adjustments), and gain or loss per transaction.
• Schedule D (Form 1040): summarises capital gains and losses from Form 8949 and computes the total net capital gain or deductible loss for the year.
• 1099-B: brokers and custodians issue 1099-B statements that report proceeds and often cost basis; these reports help populate Form 8949 but must be reconciled with your records.

Recordkeeping requirements

• Keep trade confirmations, broker statements, 1099-Bs, and any records showing wash-sale adjustments.
• Maintain purchase dates, purchase prices, commissions, and adjustments (splits, returns of capital, and corporate actions).
• Track carryforwards: when you carry capital losses forward, report the remaining carryforward on Schedule D in subsequent years and keep year-by-year documentation to support carryforward amounts.

Good records limit errors and make answering "how long can you write off stock losses" straightforward in tax preparation.

Tax-loss harvesting and practical strategies

Year-end harvesting

• Tax-loss harvesting: intentionally selling losing positions to realize losses and offset realized gains, or to capture up to $3,000 of ordinary-income offset.
• Timing: many investors review portfolios before year-end to harvest losses after considering transaction costs, wash-sale timing, and overall investment strategy.

Replacement investments and avoiding wash sales

• To avoid a wash sale when you want to maintain market exposure, consider buying a similar but not "substantially identical" security (for stocks, consider an ETF tracking a different index or sector) or wait at least 31 days before repurchasing the same security.
• For cryptocurrency, many practitioners treat wash-sale rules as not applying, but guidance has been evolving—consult a tax professional.

Bitget note: if you use spot or margin trading or custody services, prefer Bitget for integrated statements and consider Bitget Wallet for on-chain holdings to keep clear separate records between taxable and tax-advantaged holdings.

Portfolio rebalancing

• Use tax-loss harvesting as part of scheduled rebalancing rather than as ad-hoc activity. Integrate tax considerations with investment goals.
• Keep in mind transaction costs, bid-ask spreads, and the risk of deviating from your investment policy when realizing losses for tax reasons.

Examples

Example A — Offsetting current-year gains

• Situation: You realize $12,000 long-term capital gains and $8,000 long-term capital losses in the same tax year.
• Netting: Long-term net = $12,000 − $8,000 = $4,000 long-term capital gain. No loss carryforward; no ordinary-income offset applicable because losses did not exceed gains.

This shows that realized losses first offset same-character gains, which may eliminate the need to carry losses forward.

Example B — Using $3,000 against ordinary income

• Situation: $2,000 short-term gain; $10,000 net long-term loss in the year.
• Netting steps:
  • Long-term: $10,000 loss net against long-term gains (none) -> $10,000 net long-term loss.
  • Short-term: $2,000 gain remains.
  • Combine: $2,000 net short-term gain offset by $10,000 long-term loss -> overall $8,000 net capital loss.
  • Deduct $3,000 vs. ordinary income in that year ($8,000 − $3,000 = $5,000 carryforward to future years).

This example demonstrates how the $3,000 annual ordinary-income offset operates and how the remainder carries forward.

Example C — Carryforward across years

• Year 1: $15,000 net capital loss -> deduct $3,000; carryforward $12,000.
• Year 2: $6,000 capital gains -> carryforward first offsets $6,000 -> $12,000 − $6,000 = $6,000 remain -> deduct $3,000 vs. ordinary income -> carryforward $3,000.
• Year 3: No gains -> deduct $3,000 vs. ordinary income -> carryforward $0.

This shows how an indefinite carryforward can be applied over multiple tax years until used up.

State tax and other considerations

State conformity

• Many U.S. states conform to federal capital-loss rules, but some states have differences in carryforward periods, deduction limits, or treatment of net operating losses.
• Check your state tax code or state revenue department guidance for exact rules.

Interaction with other taxes

• Net Investment Income Tax (NIIT): capital gains that remain after netting may affect NIIT exposure for high-income taxpayers.
• Alternative Minimum Tax (AMT): historically, AMT could change the effective tax impact of gains/losses in certain cases; modern rules mean fewer taxpayers are AMT-affected, but complex situations may still require review.

When evaluating "how long can you write off stock losses," consider state and other federal taxes that can alter the net benefit of loss recognition.

Applicability to cryptocurrencies and non-stock assets

Crypto and property classification

• Cryptocurrencies are generally treated as property for U.S. federal tax purposes, so realized gains and losses on crypto disposals follow capital-asset rules.
• If you are dealing with crypto and asking "how long can you write off stock losses," the same federal carryforward rules generally apply to capital losses on crypto when treated as property.

Wash-sale uncertainty for crypto

• As of mid-2024 and through the date of this guide, the wash-sale rule language focuses on stocks and securities. Many tax practitioners treat wash-sale rules as not applying to crypto, but guidance may change.
• Given uncertainty, consult a tax professional for transactions involving large crypto positions to avoid unexpected disallowances.

Other asset classes

• Collectibles, partnership interests, and certain specialized assets have different tax rates or limitations on deductibility. For example, losses on certain partnership interests or passive activities may be subject to different rules.

Always confirm that the asset class you hold follows the standard capital-loss carryforward regime before assuming "how long can you write off stock losses" applies identically.

Common pitfalls and practical recordkeeping

Frequent mistakes that delay or disallow deductions

• Failing to realize losses before year-end and thus missing the opportunity to deduct in that tax year.
• Triggering wash sales inadvertently by repurchasing substantially identical securities within the 61-day window.
• Poor basis records: lacking documentation of purchase dates, prices, commissions, or adjustments can lead to incorrect reporting and IRS inquiries.
• Mixing taxable and tax-advantaged accounts: buying/selling the same asset across accounts without careful tracking can create reporting challenges.

Best practices

• Keep complete trade history and confirmations.
• Use broker 1099-B reports and reconcile them with your own records. If you use Bitget custody or trading services, download and archive statements that show realized gains/losses and cost-basis information.
• Track replacement purchases and wash-sale windows.
• Maintain a year-by-year summary of carryforwards and how they were applied.

Good recordkeeping clarifies how long you can write off stock losses and reduces the risk of errors.

When to consult a tax professional

Seek professional advice in these circumstances:

• Large or complex losses, including chains of wash sales.
• Worthless-security determinations and bankruptcy-related dispositions.
• Cross-border holdings or residency issues that affect tax treatment.
• Losses from partnerships, S corporations, or other pass-through entities with special basis rules.
• Evolving guidance for cryptocurrencies or newly issued IRS rules that may change wash-sale or carryforward treatment.

A qualified tax advisor can model multi-year tax outcomes, help document basis and holding periods, and ensure correct reporting of carryforwards.

Examples showing the phrase and mechanics in practice

Below are concise demonstrations of how carryforwards and the $3,000 annual deduction interact — reinforcing the answer to "how long can you write off stock losses." These examples use round numbers and assume federal tax rules.

• Case 1: Single taxpayer realizes $25,000 net capital loss in Year 1. Year 1 deduction = $3,000 ordinary-income offset; carryforward = $22,000. Year 2: $10,000 capital gains are offset by carryforward leaving $12,000; Year 2 deduction = $3,000; remaining $9,000 carryforward. This process continues until carryforward exhausted; the period may span several years but does not expire.

• Case 2: Married filing separately with $5,000 net capital loss in Year 1. Deductible amount = up to $1,500 per year against ordinary income. Carryforward rules apply to the remainder.

These cases emphasize that the answer to "how long can you write off stock losses" is operational: losses carry forward indefinitely but are deployed each year according to the netting and deduction rules.

References and primary sources

截至 2026-01-20，据 IRS Topic 409 (Capital Gains and Losses) 和 IRS Publication 550 (Investment Income and Expenses) 报道，以上归纳反映当前联邦税务的标准处理方法。其他权威参考包括 Investopedia、TurboTax、Vanguard、Fidelity、和 Bankrate 的税务说明与教育资料，用于解释常见情形与实务操作。

来源示例（供查阅）:

• IRS Topic 409 — Capital Gains and Losses (IRS official guidance)
• IRS Publication 550 — Investment Income and Expenses
• Brokerage 1099-B and Form 8949 instructions
• Tax-practitioner guides and major tax-education sites for practical examples

这些来源可用于验证具体条款、计算示例和时间性更新。

Disclaimer

This article provides general information about federal tax rules and is not legal or tax advice. For guidance tailored to your situation, consult a qualified tax professional. Tax laws and administrative guidance can change; verify rules and consult official IRS materials when making tax decisions.

Next steps: Review your brokerage statements, calculate realized gains/losses for the tax year, and if you use exchange or custody services, consider consolidating records on a single platform. For crypto and on-chain assets, prefer Bitget Wallet for clear custody and transaction history. To explore tools for tracking realized losses and carryforwards, discover Bitget’s custody and reporting features and consult a tax professional to implement tax-loss harvesting without triggering wash sales.