How do Tax write offs work for stock market losses? Understanding capital gains and losses

Thanks for explaining, but I'm still a bit confused. Let's say I lost $5000 on one stock but made $4000 on another stock. So I'm at a net loss of $1000 for the year. Can I deduct that full $1000 from my regular income? And is there any advantage to selling more losing stocks before year end to increase my deduction?

In your scenario with a $5,000 loss and $4,000 gain, you'd have a net capital loss of $1,000. Yes, you can deduct that full $1,000 against your other income (like wages) on your tax return. The IRS allows you to deduct up to $3,000 in net capital losses against other income per year. Regarding selling more losing stocks before year-end, this is called "tax-loss harvesting" and can be a smart strategy. If you have investments that are currently at a loss, selling them before December 31st lets you use those losses to offset any gains or up to $3,000 of ordinary income. Just be aware of the "wash-sale rule" - if you buy the same or substantially identical security within 30 days before or after selling at a loss, you can't claim that loss for tax purposes.

Does it work if you have multiple brokerage accounts? I've got stocks with Fidelity, some crypto on Coinbase, and a few options trades on Robinhood. The different platforms are making my tax situation a mess.

I'm skeptical about these tax tools. How is this different from just using TurboTax or something? They all claim to handle investments but I've found they miss things. Does it actually catch stuff that other software misses?

Yes, it works great with multiple brokerage accounts! I had accounts with TD Ameritrade, E*TRADE, and Webull, and it pulled data from all of them seamlessly. For crypto, it connects with most major exchanges including Coinbase. The multi-platform integration was actually one of the main reasons I tried it. As for the difference from regular tax software, it's specifically designed for investment taxes rather than general tax preparation. It caught several wash sales that spanned across different brokerages that TurboTax missed completely. It also provided detailed explanations about how each transaction affected my tax situation and gave recommendations for tax-loss harvesting opportunities. The reports it generated made filling out Schedule D much easier, even when I used another program for the final filing.

How exactly does this work? Like do they just call the IRS for you or what? I'm confused how a third party can get you through faster than calling directly.

This sounds like total BS. There's no way to "skip the line" with the IRS. Everyone has to wait like everyone else. I'd be very skeptical of any service claiming they can get you through faster.

They don't call the IRS for you - you still speak directly with the IRS agent yourself. What they do is use technology to navigate the phone system and wait on hold for you. Their system monitors the hold music and automatically alerts you when an agent picks up. I was skeptical too but it's completely legitimate. The IRS phone system is designed to handle a certain call volume, and during peak times they simply disconnect callers instead of extending wait times further. Claimyr's system can redial automatically if disconnected and essentially holds your place in line so you don't have to stay on the phone yourself for hours. When an agent comes on the line, you get a call connecting you directly to that agent. Nothing about it skips any official processes - it just makes the waiting process more efficient.

What about if you do this multiple years in a row? Like if I've been losing money trading for several years (don't judge lol), can I keep claiming $3k each year or is there a lifetime limit?

There's no lifetime limit on capital loss deductions! You can continue to deduct up to $3,000 per year against your ordinary income for as many years as necessary until all your accumulated losses are used up. For example, if you had a massive $30,000 trading loss in 2025 with no gains to offset it, you could deduct $3,000 per year for the next 10 years (assuming you have no capital gains in those years to offset against). The IRS essentially allows you to spread that large loss across multiple tax years. The unused losses don't expire - they carry forward indefinitely until they're used up or until you pass away, at which point any remaining loss carryovers are lost.

That's a really good point. Does anyone know if it applies to options too? Like if I sell stock XYZ at a loss but then buy call options on XYZ within 30 days, is that a wash sale?

Yes, options can definitely trigger wash sales! If you sell stock at a loss and then buy call options on the same stock within 30 days, the IRS considers that a wash sale. Same goes for selling calls at a loss and buying the underlying stock, or other combinations involving puts and calls. The "substantially identical" rule is pretty broad when it comes to options. Even buying options with different strike prices or expiration dates can sometimes trigger it if they're on the same underlying security. The IRS looks at the economic substance of the transaction, not just the technical details. This is another area where keeping detailed records becomes crucial, especially if you're actively trading both stocks and options on the same companies.