The short answer
Often, yes — but not all at once and not in every case. A realized capital loss first offsets your capital gains. If your losses are larger than your gains, you can generally deduct up to $3,000 of the excess against other income each year ($1,500 if married filing separately) and carry the rest forward to later years. A loss can be disallowed if it is a wash sale, and losses on personal-use property are not deductible at all.
Only realized losses count
A loss is reported when you sell or otherwise dispose of the investment. If your shares are worth less than you paid but you still hold them, there is nothing to deduct yet.
How losses are netted
- Short-term losses offset short-term gains, and long-term losses offset long-term gains.
- A net loss in one category then offsets a net gain in the other.
- If the overall result is still a loss, the annual limit below applies.
The annual limit and carryovers
| Filing status | Net capital loss you can deduct against other income each year |
|---|---|
| Most filers (including married filing jointly) | The lesser of $3,000 or your total net loss |
| Married filing separately | The lesser of $1,500 or your total net loss |
Any loss above the limit is a capital loss carryover to later years. Publication 550 and the Schedule D instructions include a Capital Loss Carryover Worksheet; it uses short-term losses first. If spouses filed jointly and later file separately, a carryover from the joint return can be deducted only by the spouse who actually had the loss.
Example (illustrative)
Jordan, a single filer, had a $2,000 long-term gain and a $12,000 short-term loss in 2025. The loss first wipes out the $2,000 gain, leaving a $10,000 net loss. Jordan deducts $3,000 against other income for 2025 and carries the remaining $7,000 forward.
Wash sales: when a loss is disallowed
You generally have a wash sale if you sell stock or securities at a loss and, within 30 days before or after the sale, you buy substantially identical stock or securities — or acquire them in a fully taxable trade, acquire a contract or option to buy them, or acquire them for your IRA or Roth IRA. A purchase by your spouse or by a corporation you control can also trigger a wash sale.
| Who bought the replacement shares | What happens to the loss |
|---|---|
| You, in a taxable account | Disallowed now, but added to the basis of the new shares — the loss is postponed, not lost |
| Your IRA or Roth IRA | Disallowed, and not added to your IRA or Roth IRA basis — the loss is generally lost for good (IRS Rev. Rul. 2008-5) |
A wash sale applies even if it does not appear on your Form 1099-B.
Digital assets: the wash sale rule applies to stock or securities. The 2026 Instructions for Form 1099-DA require brokers to report disallowed wash sale losses for tokenized securities — digital assets treated as stock or securities — in box 1i. The IRS sources reviewed for this guide do not say whether, or how, the wash sale rule applies to other digital assets, such as bitcoin, so this guide takes no position. Do not assume every crypto transaction is exempt; check current IRS guidance or get professional advice. See Crypto taxes explained.
A loss on personal-use property — such as your car or the home you live in — is not deductible. Some of these sales still have to be reported, for example when you receive a Form 1099-S or Form 1099-K. See I sold my house and I got a 1099-K.
How to report
Report each sale on Form 8949 (short-term in Part I, long-term in Part II), including any wash sale adjustment, and carry the totals to Schedule D. For how gains themselves are taxed, see I sold stock — how are capital gains taxed? Crypto losses are also capital losses that go through the same netting and annual limit — see Crypto taxes explained.