Offsetting Capital Gains with Losses
The IRS provides a step-by-step procedure for deducting stock losses and other capital losses on your taxes. Divide gains and losses into short term and long term. A gain or loss is long term if you own the asset for more than a year. Otherwise it’s short term. Subtract long-term losses from long-term gains to find the net long-term gain or loss. Do the same for short-term gains and losses. Use any net loss in one category as a deduction against gains in the other category. If there’s still a net loss remaining, you may use up to $3,000 as a deduction against other income and carry amounts over $3,000 forward to use as a tax deduction in a future year.