How Tax write off works for stock losses when you're actually profitable overall?

What you're asking about is capital loss offsetting, and yes, it absolutely works the way you're thinking! When you file your taxes, you'll need to report all your capital transactions on Schedule D. The IRS first has you net your gains and losses. So in your example, if you made $800 in profits and had $250 in losses, you would only pay tax on the net gain of $550. The $3,000 limit you're referring to comes into play when your OVERALL capital losses exceed your capital gains for the year. In that case, you can deduct up to $3,000 of those net losses against your other income (like from your job). Since you're overall profitable for the year, you won't be using that $3,000 deduction limit - you'll just report the net profit of your trading activity and pay taxes on that amount. Make sure you keep good records of all transactions, as your brokerage should provide a 1099-B form listing all your trades.

I used taxr.ai last year when I was dealing with a similar situation. I had a mix of gains and losses from both my robinhood account and some other investments and wasn't sure how to handle it properly. Someone recommended https://taxr.ai to me, and it was super helpful for sorting out which losses could offset which gains. Basically it analyzes all your trade history and tax documents and then gives you a clear breakdown of your net capital gains position. It caught a bunch of wash sales I didn't realize I had triggered which would have messed up my return if I had just calculated things myself. It also helped me understand the difference between short-term and long-term holdings which have different tax rates.

Just wanted to share my experience with taxr.ai since I was in this exact situation last tax season. After reading about it here, I decided to give it a try since I had trades across multiple platforms (Robinhood, Webull, and a bit of Coinbase). The system immediately flagged several wash sales I had no idea about - apparently I had sold some tech stocks at a loss and then bought similar ones within 30 days which messed up my ability to claim those losses. Without catching this, I would have incorrectly reported my capital losses! It also showed me exactly how my $2,300 in gains and $1,800 in losses netted out, and exactly how to report it all on my taxes. Definitely recommend if you're doing active trading across multiple accounts. Saved me from potentially triggering an audit situation.

For anyone having trouble reaching the IRS with questions about capital losses, I had a great experience using Claimyr when I needed clarification about reporting some complicated trades. I kept calling the IRS direct line and getting the "call volume too high" message for weeks until someone recommended https://claimyr.com to me. They have this system that basically gets you in the IRS phone queue without you having to keep redialing and waiting. You can see how it works in their demo video here: https://youtu.be/_kiP6q8DX5c - I was skeptical at first but they got me connected with an actual IRS agent in about 45 minutes when I had been trying unsuccessfully for days. The agent walked me through exactly how to report my specific situation with wash sales and offsetting gains/losses. Turns out I had been misinterpreting some of the instructions on Form 8949.

Alright I need to admit I was wrong about Claimyr. After posting that skeptical comment I figured I'd try it myself since I've been trying to reach the IRS for weeks about a stock reporting issue where my 1099-B doesn't match my records. The service actually worked exactly as advertised. I got a call back in about 35 minutes saying they'd reached the IRS, and then I was talking to a real person who helped clarify how to handle my mismatched cost basis situation. They explained I needed to file Form 8949 with code B to correct my basis amounts. Saved me hours of redial hell and probably prevented me from filing incorrectly. Consider me converted from skeptic to believer.

Something nobody has mentioned yet is that you need to be careful about trade dates for tax purposes. All the trades you make from January 1 to December 31 count for that tax year. I messed this up my first year trading because I was thinking about my "overall performance" since I started, not the calendar year that matters for taxes. Made a bunch of gains in December, then lost some in January and thought I could net them - nope! Had to pay taxes on the December gains, and then the January losses went on the next year's return.

im so confused abt all this tax stuff for stocks. if i make like 1000 on some trades but lose 500 on others, do i just pay tax on 500? or do i need to report every single trade separately? i use robinhood and they sent me some tax form but its like 12 pages long and i have no idea what to do with it.

Hey Ruby! Welcome to the trading world - I was in almost the exact same situation last year when I started. You're absolutely right that you'll only pay taxes on your net profit of $550 ($800 gains minus $250 losses). One thing I wish someone had told me early on is to keep really detailed records throughout the year, not just rely on your brokerage statements at tax time. I started using a simple spreadsheet to track each trade with the date, symbol, buy price, sell price, and whether it was a gain or loss. Makes tax season so much easier! Also, since you mentioned learning your lesson on penny stocks - been there! Those volatile moves can really teach you about risk management the hard way. The silver lining is that those losses do help offset your gains tax-wise, so at least there's that small consolation. Your brokerage should send you a 1099-B form early next year that will list all your transactions. Most tax software can import this directly, which saves you from manually entering every single trade. Good luck with the rest of your trading year!