Capital Loss

Investing

A capital loss occurs when you sell an investment for less than its cost basis. Losses first offset gains of the same type (short-term vs short-term, long-term vs long-term); any remaining losses offset opposite-type gains. After all gains are offset, up to $3,000 of net capital losses can offset ordinary income annually ($1,500 if married filing separately). Excess losses carry forward indefinitely. Tax-loss harvesting — deliberately selling losing positions to capture the tax benefit while staying invested in similar assets — is a foundational strategy for taxable accounts. The wash-sale rule prevents claiming losses if you buy back within 30 days.