How to deduct more than $3000 in capital losses for tax purposes? Any workarounds?

5 Wait I'm confused. So she can use ALL the losses from last year against this year's gains? I thought she could only deduct $3000 per year no matter what? Also what's this mark-to-market thing - would that help her situation? Does she need to apply for that status now or could she do it retroactively?

18 Yes, she can use ALL the capital losses from last year to offset capital gains in the current year. The $3,000 limit only applies to capital losses that exceed capital gains when deducting against ordinary income (like wages). For the mark-to-market election (Section 475(f)), it's extremely difficult to qualify for trader tax status. The IRS looks for someone who trades substantially, regularly, continuously, and with the primary purpose of income or profit. We're talking hundreds of trades per year, significant time devoted daily to trading, etc. This isn't something she could do retroactively - it must be elected by April 15 of the year you want it to apply. And once elected, all securities would be treated as sold at fair market value on December 31, which has its own consequences.

12 How does it handle crypto losses? I've got about $8k in crypto losses but my accountant said something about different rules for crypto vs stocks. And does it actually give you advice or just do calculations?

9 I'm skeptical of these tax tools since every situation is different. Can it actually help with the trader tax status mentioned above? That seems like a pretty complex area the IRS scrutinizes heavily. Also, does it integrate with brokerage accounts or do you have to manually enter all your trades?

7 For crypto losses, the tool handles them specifically as a separate asset class, accounting for the fact that wash sale rules technically don't apply to crypto (though that may change soon with pending legislation). It both calculates and provides strategic advice based on your specific situation. Regarding trader tax status, it actually has a specific assessment module that analyzes your trading patterns against IRS criteria to determine if you might qualify. It doesn't just give a yes/no answer but shows where you stand on each requirement (frequency, volume, holding periods, etc.) and what you'd need to change to potentially qualify. The tool integrates with most major brokerages for automatic import, but you can also upload statements or enter trades manually if needed.

14 Wait, you actually got through to the IRS? I've literally spent hours on hold only to get disconnected. How does this service work? Seems sketchy that they can somehow get through when regular people can't.

22 This sounds like a scam. Why would I pay someone else to call the IRS for me? And how would they get through any faster than I could? The IRS phone system is the same for everyone. Plus, wouldn't I need to be on the call myself to discuss my personal tax information?

3 It's not that they call the IRS for you - they use a proprietary system to navigate the IRS phone tree and wait on hold in your place. When an agent actually comes on the line, you get a call back and are connected directly to that agent. It saved me about 2 hours of hold time. You're absolutely right that you need to be on the call yourself to discuss your information - that's exactly how it works. They just handle the hold time for you, then connect you when an actual person is available. I was skeptical too but desperately needed answers about my capital loss carryovers before filing deadline, and it actually worked perfectly.

1 I've heard about tax-loss harvesting but don't fully understand how it works. Doesn't that just mean selling losing investments to offset gains? Would that have helped in my sister's situation where she already has the losses from last year?

8 Tax-loss harvesting is about strategically selling investments at a loss to offset capital gains from other investments, which can lower your overall tax burden. It's most effective when done throughout the year rather than just at year-end. In your sister's specific situation, tax-loss harvesting wouldn't help with her existing losses, but it could be a strategy for her to use going forward. Since she's already up $17,000 this year, she could potentially look at her current portfolio for any underperforming investments that she might want to sell at a loss to offset some of this year's gains. Just make sure she's aware of wash sale rules if she plans to repurchase similar securities within 30 days.

19 Would that actually work? I thought married filing jointly meant you're treated as one taxpayer for this purpose? Wouldn't you need to file separately to get separate $3000 limits?

15 You're right to question this - I should have been clearer. For married filing jointly, the limit is still $3,000 total for the couple. If filing separately, each spouse has a $1,500 limit. My suggestion about splitting accounts was more about long-term tax planning where each spouse might strategically realize gains and losses in different tax years, but the annual limit against ordinary income remains $3,000 for joint filers.

Thanks Nina, this is exactly what I was hoping to hear! So just to make sure I understand correctly - she can use all $13,500 of her losses from last year to offset the $17,000 gains this year, which means she'd only pay taxes on the remaining $3,500 in net gains? And then she wouldn't have any losses left to carry forward since they all got used up? This seems almost too good to be true given how stressed we've been about the $3,000 annual limit!