Can I take losses on my stocks and use the standard deduction? (2024)

FAQs

Can I write off stock losses if I take the standard deduction? ›

Yes, but there are limits. Losses on your investments are first used to offset capital gains of the same type. So, short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. Net losses of either type can then be deducted against the other kind of gain.

The IRS allows you to deduct from your taxable income a capital loss, for example, from a stock or other investment that has lost money. Here are the ground rules: An investment loss has to be realized. In other words, you need to have sold your stock to claim a deduction.

The truth is, however, that the two are distinct and separate from one another. This means that you can declare a business loss and take a standard deduction on the same tax return.

The $3,000 loss limit is the amount that can be offset against ordinary income. Above $3,000 is where things can get complicated. The $3,000 loss limit rule can be found in IRC Section 1211(b). For investors with more than $3,000 in capital losses, the remaining amount can't be used toward the current tax year.

“The simple answer to your question is yes, you can deduct capital losses even if you take the standard deduction.”

If you own a stock where the company has declared bankruptcy and the stock has become worthless, you can generally deduct the full amount of your loss on that stock — up to annual IRS limits with the ability to carry excess losses forward to future years.

Capital losses that exceed capital gains in a year may be used to offset capital gains or as a deduction against ordinary income up to $3,000 in any one tax year. Net capital losses in excess of $3,000 can be carried forward indefinitely until the amount is exhausted.

If the net amount of all your gains and losses is a loss, you can report the loss on your return. You can report current year net losses up to $3,000 — or $1,500 if married filing separately. Carry over net losses of more than $3,000 to next year's return. You can carry over capital losses indefinitely.

The IRS will let you deduct up to $3,000 of capital losses (or up to $1,500 if you and your spouse are filing separate tax returns). If you have any leftover losses, you can carry the amount forward and claim it on a future tax return.

Deductible expenses

You can deduct these expenses whether you take the standard deduction or itemize: Alimony payments. Business use of your car. Business use of your home.

Can S Corp losses offset personal income? ›

Any business income or loss is "passed through" to shareholders who report it on their personal income tax returns. This means that business losses can offset other income on the shareholders' tax returns.

If you're self-employed or own a business, you can deduct business expenses on your taxes regardless of whether you take the standard deduction or itemize. "Business expenses are known as above the line deductions which are available regardless of the choice to itemize.

You can deduct stock losses from other reported taxable income up to the maximum amount allowed by the IRS—up to $3,000 a year—if you have no capital gains to offset your capital losses or if the total net figure between your short- and long-term capital gains and losses is a negative number, representing an overall ...

If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 16 of Schedule D (Form 1040), Capital Gains and Losses.

But one can impact the other. The answer to the question “does the standard deduction apply to capital gains?” is technically yes, as the standard deduction applies to all taxable income (though capital gains tend to be taxed at a lower rate).