how long can you carry over stock losses guide

This guide answers “how long can you carry over stock losses” for U.S. individual taxpayers, explains $3,000 annual limits, short- vs long-term treatment, wash-sale impacts, reporting on Schedule D...

2026-02-10 00:26:00

By Blockchain Lexicon

Article rating

4.3

118 ratings

Bitget offers a variety of ways to buy or sell popular cryptocurrencies. Buy now!

A welcome pack worth 6200 USDT for new users! Sign up now!

Carrying Over Stock Losses (Capital Loss Carryovers)

As an investor, you may wonder how long can you carry over stock losses and how those losses interact with gains, ordinary income limits, and tax reporting. This guide answers that question directly for U.S. federal tax treatment, explains which assets and accounts are included or excluded, details the wash-sale rule and its treatment of crypto, and provides practical tax-loss harvesting, reporting, and recordkeeping advice. Read on to learn actionable steps you can take and how Bitget tools (including Bitget Wallet) can help manage crypto positions while complying with carryover rules.

As of 2024-06-01, according to IRS Topic 409 and the Schedule D instructions, individual taxpayers may generally carry forward net capital losses indefinitely until the loss is exhausted.

Overview and Scope

This guide focuses on U.S. federal tax principles applicable to capital loss carryovers. It covers:

Publicly traded stocks, ETFs, mutual funds, and—under current U.S. tax treatment—cryptocurrencies treated as property.
Excluded accounts: tax-advantaged retirement accounts such as IRAs, Roth IRAs, and many employer-sponsored retirement plans generally do not allow capital-loss deductions for transactions within those accounts.

Note: state tax rules may differ. If you have state tax obligations, check your state tax authority or consult a tax professional for state-specific carryover rules.

Core U.S. Federal Rules

Key mechanics you should understand:

Netting gains and losses: capital gains and losses for the year are first netted within categories (short-term vs long-term) and then against each other to produce a net capital gain or loss for the year.
Short-term vs long-term classification: assets held one year or less produce short-term gains/losses; assets held more than one year produce long-term gains/losses. This classification affects tax rates for gains and the order of netting.
Order of netting: short-term gains/losses are tallied separately from long-term gains/losses, then combined to determine the overall net capital position for the year.

Key result for most individuals:

If you have an unused net capital loss at year-end, you may carry that loss forward indefinitely until it is exhausted. Each taxable year you may deduct up to $3,000 of net capital loss against ordinary income ($1,500 if married filing separately). Any remaining loss after applying the annual deduction is carried forward to subsequent years.

The rest of this guide explains these rules in depth, how they work with cryptocurrencies, the impact of the wash-sale rule, reporting requirements, and practical strategies.

Short-term vs. Long-term Losses in Carryovers

Losses are tracked by character:

Short-term losses offset short-term gains first. Long-term losses offset long-term gains first.
If after netting within categories there is a net short-term loss and net long-term gain (or vice versa), the remaining losses/gains combine to produce the overall net capital gain or loss.
When a loss is carried forward, it retains its character (short-term or long-term). For example, a short-term loss carried forward remains short-term in the carryover worksheet and will be applied first to future short-term gains.

How Long Can You Carry Over Stock Losses?

Direct answer: For individual taxpayers under current U.S. federal law, capital losses may be carried forward indefinitely until exhausted. That is, there is no automatic expiration year for an individual’s capital loss carryovers at the federal level.

Example summary: If you realize a $10,000 net capital loss in 2024, you may use up to $3,000 of that loss to offset ordinary income in 2024 and carry $7,000 forward to 2025. The remaining loss continues to carry forward year after year until fully used.

Contrast with corporations:

Corporate rules differ. Historically, corporations have had distinct carryback or carryforward periods (e.g., net operating loss and capital loss carryback/carryforward rules vary by tax regime and by statute). Corporate capital loss carrybacks and carryforwards are subject to separate rules; corporations should consult corporate tax guidance or a tax professional for precise treatment.

Annual Limit on Deduction and Usage Order

How you use carryovers each year follows this order:

Apply current-year capital gains with current-year capital losses by category (short-term with short-term; long-term with long-term).
If there is a net gain in one category and a net loss in the other category, offset them to reach an overall net capital gain or loss.
If the result is a net capital loss for the year, you may deduct up to $3,000 of that net loss against ordinary income in that tax year ($1,500 if married filing separately).
Any remaining net capital loss after step 3 becomes the carryover to the next tax year.

Important points:

The $3,000 limit is the annual amount allowed against ordinary income, not the amount that must be applied; if you prefer to preserve losses to offset future capital gains, you may plan sales accordingly, but the mandatory carryover will remain available for offset.
Carryover application follows the short-term/long-term character tracking described earlier.

Reporting and Recordkeeping

Where losses and carryovers appear on U.S. tax forms:

Form 8949: used to report individual sales and exchanges of capital assets, including transactions in stocks and many crypto trades (crypto is treated as property under current IRS guidance). Use Form 8949 to show details of each transaction and any adjustments, including wash-sale disallowances when applicable.
Schedule D (Form 1040): summarizes totals from Form 8949, shows the netting of short-term and long-term gains and losses, and carries forward capital loss amounts from prior years via the Capital Loss Carryover Worksheet.
Capital Loss Carryover Worksheet: taxpayers use the worksheet (found in the Schedule D instructions) to compute the loss amount that is carried forward to the next year.

Recordkeeping best practices:

Retain trade confirmations, broker statements, and wallet/transaction records for crypto (including timestamps, amounts, and transaction IDs where available).
Keep prior-year Schedule D and the Capital Loss Carryover Worksheet — these documents are essential to prove the loss amount that you are carrying forward.
Ensure Form 8949 and Schedule D reflect any wash-sale adjustments and basis changes accurately; poor recordkeeping is a common source of reporting errors.

The Wash-Sale Rule and Its Effect on Carryovers

What the wash-sale rule is:

The wash-sale rule disallows a loss deduction if you sell a security at a loss and acquire a “substantially identical” security within 30 days before or after the sale date.
When a loss is disallowed by the wash-sale rule, that disallowed loss is not lost forever. Instead, the disallowed amount is added to the cost basis of the replacement shares. The carryover computation must reflect that the original loss was disallowed for the year and adjusted into future basis.

How wash sales affect carryovers:

A disallowed loss cannot be included in the net capital loss for that tax year and therefore cannot be carried forward as an unused loss for that year. The adjusted basis of the replacement shares effectively preserves the deferred loss for future tax recognition when those replacement shares are eventually sold.

Crypto and the wash-sale rule (practical ambiguity):

The IRS currently treats cryptocurrencies as property, not as securities. Because the statutory wash-sale rule applies specifically to ‘‘stocks or securities’’ under the tax code language, there is practical ambiguity about whether the wash-sale rule applies to crypto.
As of 2024-06-01, the IRS has not issued definitive, comprehensive guidance applying the wash-sale rule explicitly to cryptocurrency. Taxpayers should therefore exercise caution: many tax preparers and software treat crypto differently and some taxpayers voluntarily apply wash-sale-like discipline to crypto trades.
For clarity and risk management, consult a qualified tax professional and watch for updated IRS guidance.

Tax-Loss Harvesting Strategies

Tax-loss harvesting is the practice of selling investments at a loss to realize a tax benefit (offset gains or create a deductible loss). Common strategies include:

Harvesting losers to offset current-year capital gains: realize losses to offset taxable gains realized elsewhere in your portfolio.
Maintaining market exposure while avoiding wash-sales: replace a sold security with a broadly similar but not ‘‘substantially identical’’ security (for example, selling a particular large-cap stock and buying a different large-cap ETF or a diversified fund) to stay invested while realizing the tax loss. In crypto, some traders substitute between assets with similar exposure while avoiding direct repurchases within the 30-day window if concerned about wash-sale treatment.
Spreading harvesting across multiple tax years: if you have very large losses, plan how much to realize and how to use the $3,000 ordinary-income offset each year versus holding losses to offset future gains.

Tools and broker/advisor solutions:

Many brokerage and advisory platforms provide tax-loss harvesting tools that can identify candidates for harvesting, simulate the tax effect, and automatically generate replacement trades that avoid wash-sale issues.
For cryptocurrency investors, use secure wallets and platforms that provide clear transaction history exports. Bitget’s tools and Bitget Wallet can help with consolidated transaction records and position management — useful when documenting basis and holding periods for carryover computations.

Note: This content is educational and not investment advice. Tax-loss harvesting may affect your portfolio’s risk profile and should be considered in the context of your investment objectives.

Special Situations and Exceptions

Several special circumstances change how losses are treated:

Mutual fund and ETF distributions: capital gain distributions received from funds in a tax year can be offset by realized losses if you harvest losses in the same year. Keep careful records of distribution dates and types (long-term vs short-term).
Personal-use property: losses from the sale of personal-use property (for example, household items or collectibles used personally) are typically not deductible.
Gifts and inherited property: tax basis and holding-period rules differ. Losses on sales to related parties or on the sale of property inherited have special basis rules that affect whether and how a loss can be recognized.
Tax-advantaged accounts: transactions inside IRAs, Roth IRAs, and many retirement accounts do not produce deductible capital losses.

If your situation includes these complexities, consult a tax advisor.

State Tax and Corporate Differences

State rules: some states follow federal treatment of capital loss carryovers; others diverge. A few states impose limits, have different annual deduction amounts, or do not allow indefinite carryforwards. Check your state tax code or consult a professional.
Corporate treatment: corporations face different rules for capital losses, including possible restrictions on carrybacks or carryforwards and interaction with net operating loss rules. Corporate taxpayers should consult corporate tax guidance.

Examples

Example 1 — Netting long-term and short-term gains/losses and $3,000 offset:

Suppose in Year 1 you have: short-term gains of $2,000, short-term losses of $5,000, long-term gains of $1,000, and long-term losses of $4,000.
- Short-term net = $2,000 - $5,000 = -$3,000 (net short-term loss).
- Long-term net = $1,000 - $4,000 = -$3,000 (net long-term loss).
- Combined net capital loss = -$6,000.
- Deductible against ordinary income in Year 1 = $3,000 (maximum allowable).
- Carryover to Year 2 = $3,000 (retain character: a mix of long-term and short-term losses as computed on the carryover worksheet).

Example 2 — Carryforward across years:

Year 1: $10,000 net capital loss. Deduct $3,000 against ordinary income. Carry forward $7,000.
Year 2: you realize $2,000 capital gains. Apply carryover: first offset capital gains ($2,000) leaving $5,000 loss. Deduct up to $3,000 against ordinary income. Carry forward $2,000 to Year 3.
Year 3 and onward: continue applying the remaining $2,000 loss to gains or $3,000 ordinary-income offset until exhausted.

These examples assume no wash-sale disallowance and that the losses maintain their character as tracked on the Schedule D carryover worksheet.

Common Errors and Compliance Tips

Frequent mistakes and how to avoid them:

Failing to carry forward prior losses: always keep prior-year Schedule D and the Capital Loss Carryover Worksheet; forgetfulness can cause missed deductions.
Ignoring wash-sale adjustments: if you repurchase substantially identical securities within 30 days, adjust your forms accordingly. For crypto, track marketplaces and timestamps carefully and consult guidance.
Poor recordkeeping: missing trade confirmations, unclear basis records, or unorganized wallet exports make accurate reporting difficult.

Practical tips:

Maintain a running carryover worksheet and reconcile it each year against your tax return.
Keep detailed transaction records and broker/wallet statements in a secure folder for at least several years.
Use tax software or professional preparers familiar with securities and crypto reporting.
If you use Bitget Wallet for crypto trades, export transaction histories to assist Form 8949 completion and carryover worksheets.

International Considerations

Tax rules for capital loss carryovers vary widely internationally:

Some countries limit carryforwards to a fixed number of years; others allow indefinite carryforwards but with different annual offset limits.
Countries differ in how they treat cryptocurrencies for tax purposes (property, currency, or special asset class), so cross-border investors should confirm local rules.

If you have cross-border exposure, consult local tax counsel or a cross-border tax specialist.

Frequently Asked Questions

Q: Can I carry losses forever? A: For individual taxpayers under current U.S. federal law, yes — capital losses may be carried forward indefinitely until exhausted.

Q: Does the $3,000 limit apply if I have no gains? A: Yes. If you have no capital gains in a tax year, you may still deduct up to $3,000 of net capital loss against ordinary income ($1,500 if married filing separately). The remainder carries forward.

Q: Do wash-sale rules apply to crypto? A: As of 2024-06-01, the IRS treats crypto as property, not as securities. The statutory wash-sale rule applies to ‘‘stocks or securities,’’ so whether wash-sale rules apply to crypto is legally ambiguous. Taxpayers should consult a tax professional and monitor IRS updates.

Q: How do I report carryovers? A: Report transactions on Form 8949 and summary totals on Schedule D. Use the Capital Loss Carryover Worksheet in the Schedule D instructions to compute the amount to carry forward.

Q: If I have carryovers from many years, how are they applied? A: Carryovers retain their character (short-term or long-term) and are applied in the current year in the netting order described earlier, before any $3,000 ordinary-income deduction.

Reporting Date and Sources

As of 2024-06-01, according to IRS Topic 409 and the Schedule D instructions, U.S. federal rules allow individual taxpayers to carry forward net capital losses indefinitely until they are used.

Practical Next Steps (Actionable Takeaways)

Verify your carryover: locate last year’s Schedule D and the Capital Loss Carryover Worksheet and confirm amounts carried forward.
Reconcile transaction history: export trade confirmations and wallet transaction logs (Bitget Wallet users can export histories) and reconcile with Form 8949 entries.
Consider harvesting opportunities: if you have realized gains this year, evaluate tax-loss harvesting opportunities to offset gains while managing portfolio exposure.
Consult a pro: complex situations—corporate transactions, gifts, inherited property, or international exposure—warrant personalized advice from a tax professional.

Further explore Bitget features for portfolio management, transaction export, and Bitget Wallet for secure custody and clear transaction histories to make carryover and reporting tasks easier.

Sources and Attribution

This guide’s structure and rules were compiled from public IRS guidance (Topic 409 and Schedule D instructions), broker educational materials, and industry tax-prep resources. Rules and guidance can change — consult the IRS and a qualified tax professional for updates.

More Practical Examples and Scenarios

Scenario A — Large loss spanning multiple years:

Year A: realize $50,000 net capital loss.
Year A deduction = $3,000. Carryover to Year B = $47,000.
Year B: realize $10,000 capital gain. Use $10,000 of carryover to offset that gain, leaving $37,000.
Year B deduction against ordinary income = $3,000. Carryover to Year C = $34,000.
This continues until the carryover is exhausted. The carryover never expires for an individual under current federal rules.

Scenario B — Wash-sale interaction (securities):

Sell 100 shares of Stock X at a $5,000 loss. Within 30 days you repurchase substantially identical Stock X for the replacement shares.
The $5,000 loss is disallowed for the year. The $5,000 disallowed loss is added to the basis of the replacement shares, deferring recognition until those replacement shares are sold.
Do not include the disallowed amount in this year’s loss carryover; track the adjusted basis for future tax accounting.

Scenario C — Crypto practical approach (conservative):

Because wash-sale application to crypto is unclear, some taxpayers avoid buying the same or similar crypto within 30 days of a loss sale or substitute exposure via a clearly different asset to be conservative. Document your decisions and rationale to support your position if examined.

Common Compliance Checklist

Keep prior-year Schedule D and carryover worksheets.
Maintain raw transaction records (broker/wallet statements, trade confirmations, blockchain transaction IDs when applicable).
Reconcile Form 8949 with broker and wallet reports.
Track wash-sale events and adjust bases appropriately (for securities).
Use tax software or a preparer familiar with crypto if you trade digital assets.

Closing / Further Exploration

Understanding how long can you carry over stock losses is central to managing taxable events effectively. For most U.S. individual taxpayers, capital losses can be carried forward indefinitely and used to offset future gains or up to $3,000 a year of ordinary income. Good recordkeeping, awareness of the wash-sale rule, and clear reporting on Form 8949 and Schedule D will help you preserve and use those losses correctly.

Explore Bitget’s account and Bitget Wallet tools to export transaction histories and manage on-chain and exchange activity with clearer records for tax reporting. For personal tax guidance and any changes to law or IRS guidance, consult a qualified tax professional.

Thank you for reading — to learn more about managing taxable crypto and securities activity with streamlined recordkeeping and secure custody, explore Bitget Wallet and Bitget account features.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.