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Personal Tax5 min readMar 17, 2026
Can You Deduct Investment Losses on Your Taxes?
Investment losses can actually work in your favor at tax time. Learn how capital loss deductions and tax-loss harvesting can reduce your tax bill.
Deducting Investment Losses
Capital Loss Rules
When you sell an investment for less than you paid:
- Loss offsets capital gains first
- Net losses up to $3,000 can offset ordinary income
- Excess losses carry forward to future years (indefinitely)
Short-Term vs. Long-Term Losses
- Short-term losses first offset short-term gains
- Long-term losses first offset long-term gains
- Remaining losses cross over between categories
The $3,000 Annual Limit
If your net capital loss exceeds $3,000, the excess carries forward to the next year. There's no limit on the carryforward.
Tax-Loss Harvesting
Strategically sell losing investments to create losses that offset gains.
Example: You have $10,000 in capital gains. You harvest $10,000 in losses. Net tax on gains = $0.
The Wash-Sale Rule
You cannot deduct a loss if you buy the same or substantially identical security within 30 days before or after the sale.
- You CAN immediately buy a similar (not identical) investment
- ETF vs. a similar ETF from a different provider: usually OK
- Selling a stock and buying the same stock: NOT OK
Reporting
Report on Schedule D and Form 8949.
Had investment losses this year? Let us help you use them strategically.