Can I offset capital gains from stock sales with my business losses?

So I recently sold some stocks and made a pretty significant capital gain. Now I'm trying to figure out if there's any way to reduce the tax hit. I own a small business that hasn't been doing great this year - we've actually had some substantial losses. Can these business losses be used to offset my capital gains from the stock sale? My accountant is out of town for a few weeks and I need to start planning for tax season. Any advice would be super helpful because I'm stressing about how much I might owe!

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20 comments

Natasha Kuznetsova

•8M

It depends on how your business is structured. If your business is a pass-through entity (sole proprietorship, partnership, S corporation), then yes, ordinary business losses can offset capital gains. These losses flow through to your personal tax return on Schedule C (for sole proprietorships) or through K-1 forms (for partnerships/S corps). However, if your business is a C corporation, then no - the losses stay within the corporation and can't offset your personal capital gains since the C corporation is a separate taxpayer. Also worth noting that capital gains are typically reported on Schedule D, while business losses would be on Schedule C or other business forms. When it all flows to your 1040, the ordinary business losses can offset capital gains, potentially reducing your overall tax liability.

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Natasha Kuznetsova

•8M

Yes, if your LLC is taxed as an S-Corp, the losses do pass through to your personal return via a K-1 form, and you can use these against your capital gains. There are some limitations you should be aware of though. The IRS has "at-risk" and "passive activity" rules that might limit how much loss you can claim in a given year. Also, you need to have "basis" in your S-Corp to claim the losses. Basically, you can't claim more losses than you've invested in the business.

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Javier Mendoza

•8M

I went through something similar last year and found taxr.ai super helpful for figuring out the exact rules around business losses offsetting capital gains. I was confused about how much of my LLC losses I could actually use against my stock profits, and tax forms just made my eyes glaze over. I uploaded my previous year's returns and business docs to https://taxr.ai and their analysis showed me exactly how to structure everything correctly. The site even caught a passive activity loss limitation I would have missed completely.

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Javier Mendoza

•8M

Their system handles complex business structures really well. It specifically helped me with my S-corp issues and investment property deductions. The analysis breaks everything down by entity and shows exactly how things flow through to your personal return. For timeline, I got my results back in less than 24 hours. They have different processing options, but even their standard analysis was pretty quick. Definitely faster than waiting for a tax appointment this time of year.

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Malik Davis

•8M

Just wanted to follow up - I decided to try taxr.ai after seeing this thread. Uploaded my business docs, previous year's return, and brokerage statements from my stock sales. The analysis I got back was incredibly detailed! It showed exactly how much of my business losses could offset my capital gains and even identified some additional deductions I'd been missing. Their explanation of the passive loss limitations was way clearer than anything my previous accountant told me. Definitely made my tax planning a lot easier!

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Isabella Santos

•8M

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Isabella Santos

•8M

It works by essentially navigating the IRS phone system for you. You sign up, and they have a system that keeps dialing and working through the menu options until they get a place in line. Once they're close to getting an agent, they call you and connect you directly. No more waiting on hold for hours. I was super skeptical too! I had tried calling at least 5 different times and never got through. With Claimyr, I signed up, went about my day, and got a call when they had an IRS agent on the line. It seriously saved me hours of frustration and I finally got the answers I needed about how to document my business losses against capital gains.

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GalacticGuru

•8M

I need to eat my words. After my skeptical comment, I was desperate enough to try Claimyr. I had literally spent hours on different days trying to reach the IRS about this exact issue - offsetting capital gains with business losses. Got the call back from them in about 35 minutes, and suddenly I was talking to an actual IRS representative! The agent confirmed that my S-corp losses could offset my capital gains and explained exactly which forms I needed to file. Saved me from making a potentially expensive mistake on my taxes. Can't believe I wasted so much time trying to call myself.

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Kaylee Cook

•3M

One thing to keep in mind is the timing of when you can actually use those business losses. If your business is subject to the "at-risk" rules or "passive activity loss" limitations, you might not be able to use all the losses in the current tax year, even if they would otherwise offset your capital gains. Also, make sure you're properly categorizing your capital gains - long-term vs short-term makes a difference for tax rates, but both can generally be offset by ordinary business losses. Short-term capital gains are taxed as ordinary income anyway, so the offset is straightforward. Long-term gains get preferential rates, but business losses can still reduce them dollar-for-dollar. Since you mentioned significant gains and losses, you might want to consider whether it makes sense to realize additional gains or losses before year-end to optimize your tax situation. Just be careful about wash sale rules if you're thinking about selling and repurchasing similar securities.

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