A realized loss doesn’t just disappear into a tax return — it flows through a specific order: capital gains first, then a capped amount of ordinary income, then carries forward.
How it works
The loss first offsets any capital gains dollar for dollar, with no cap. Whatever’s left offsets ordinary income up to the annual limit ($3,000, or $1,500 married filing separately). Anything beyond that carries forward indefinitely to future tax years.
What this does not include
This doesn’t check whether repurchasing the same or a substantially identical security would trigger the wash sale rule and disallow part of the loss — this site’s separate wash sale calculator covers that check specifically.
How to use this calculator
- Enter the realized loss and any capital gains to offset this year.
- Enter the ordinary income offset limit for your filing status.
Frequently asked questions
Is there a limit on offsetting capital gains with losses?
No — an unlimited amount of capital gains can be offset by capital losses; the $3,000 cap applies only to offsetting ordinary income (wages, etc.), not other gains.
Does a loss carryforward expire?
No — unused capital losses carry forward indefinitely until fully used, unlike many other tax carryforwards that expire after a set number of years.
Should I always harvest losses immediately?
Not necessarily — the wash sale rule can disallow the loss if you repurchase too soon, and harvesting has other considerations (like resetting the holding period clock) worth weighing against the timing.
