How exactly does claiming stock market losses work on tax returns?

8 The silver lining to investment losses is definitely the tax benefit! Here's a simplified explanation: Capital gains/losses refer to profit or loss from selling investments. Short-term means you held the investment less than a year, while long-term means you held it for a year or longer. When you sell stocks at a loss, you can use those losses to offset capital gains from other investments. If your total losses exceed your gains, you can deduct up to $3,000 of excess losses against your regular income each year. Any remaining losses can be carried forward to future tax years. For tax reporting, you'll need Form 8949 to list all your transactions and Schedule D to summarize your gains and losses. Your brokerage should provide a 1099-B with all the necessary information. The tax rates differ significantly - short-term gains are taxed as ordinary income (higher rates), while long-term gains enjoy lower tax rates depending on your income bracket.

15 After losing about $4,200 on some terrible stock picks last year, I discovered taxr.ai (https://taxr.ai) and it was seriously helpful for figuring out my capital gains situation. I uploaded my brokerage statements and it automatically sorted everything into short-term and long-term categories, showed me which losses I could claim, and explained the wash sale situations I had accidentally created (oops). The tool guided me through exactly how to report everything on my tax return and showed me how much I could offset against my income. It even identified some tax-loss harvesting opportunities I hadn't noticed where I could sell certain positions to maximize my tax benefits.

13 Just wanted to follow up about taxr.ai - I tried it despite my skepticism and I'm genuinely impressed. I've been making trades across three different platforms and it correctly identified several wash sales I had no idea about. It explained that I had disallowed losses because I'd repurchased the same stocks within the 30-day window. The step-by-step guidance on how to properly report everything on Form 8949 and Schedule D saved me hours of confusion. It even showed me how to strategically sell certain underwater positions to offset some gains I had. Ended up saving about $1,700 in taxes compared to what I would have paid. Definitely more helpful than the basic tax software I was using before.

19 After struggling for WEEKS trying to get through to the IRS about a capital loss carryover question from previous years, I finally found Claimyr (https://claimyr.com). I was super frustrated because I needed to confirm how much of my previous losses I could still use this year, and couldn't get a straight answer online. The service basically holds your place in the IRS phone queue and calls you back when an agent is available. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I was honestly shocked when I got a call back with an actual IRS agent on the line about 90 minutes later.

11 I've got to eat my words about Claimyr. After being skeptical, I tried it when I needed to ask about reporting some cryptocurrency losses alongside my stock losses. Got a call back in about 2 hours with an actual IRS agent who answered all my questions about Form 8949 reporting requirements. The agent confirmed that crypto and stock losses can both be reported on the same form and count toward the same annual $3,000 limit against ordinary income. She also explained how to properly document basis for crypto that had been transferred between wallets, which was the main issue confusing me. Definitely worth it for getting clear answers directly from the IRS instead of guessing or relying on possibly outdated online info.

3 Just a heads up that TurboTax and H&R Block both handle capital gains/losses pretty well if you don't have super complicated situations. I had about 50 stock trades last year (some winners, mostly losers lol) and was able to import everything directly from my brokerage. The software walks you through classifying everything correctly.

21 Question for anyone - if I have unrealized losses (stocks that have gone down but I haven't sold yet), can I still claim those on my taxes? Or do I actually have to sell to get the tax benefit?

Great question about unrealized losses! You absolutely have to sell the stock to claim the tax loss - just holding a stock that's down in value doesn't give you any tax benefit. This is actually a strategic consideration many investors face near year-end. If you have stocks that are significantly underwater and you don't think they'll recover, selling them before December 31st lets you claim those losses on that year's tax return. Just remember the wash sale rule I mentioned earlier - if you sell for a loss but then buy back the same stock (or something "substantially identical") within 30 days before or after the sale, the IRS disallows the loss deduction. So if you still believe in the company long-term, you'd need to wait 31 days before repurchasing, or buy something similar but not identical. Some people get around this by selling their losing position in Company A and immediately buying a similar company or ETF in the same sector, so they maintain market exposure while still capturing the tax loss.