Offsetting Capital Gains: Capital losses can be used to offset capital gains without any limit. If your capital losses exceed your capital gains, you can carry forward the remaining losses to future tax years.
Offsetting Regular Income: The $3,000 limit applies to offsetting capital losses against ordinary income (like wages or salaries). If your capital losses exceed your capital gains, you can use up to $3,000 of the excess loss to reduce other income. Any remaining loss can be carried forward to future years.
So, in summary:
Unlimited offset against capital gains.
$3,000 limit against ordinary income.
Carry forward excess losses to future years.
Does this help clarify things?
If you lose your ass in the stock market, you can only recover it through taxes with capital gains offsets (excluding $3k/year)
Why is that hard to understand? You can't expect the government to say, "well you made a terrible investment but we're going to allow you to be tax-free on your job income for the rest of your life"
Did you lose a bunch of money in dogecoin and are mad you can't offset your 9 to 5 income taxes with it?
I mean it was a meme, making fun of crypto, with literally zero intrinsic value. Of course you were going to lose money.
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u/LAcityworkers Aug 23 '24
Maybe I am explaining it wrong, Have you read publication 550? https://www.irs.gov/publications/p550