Short Answer
After you net all capital gains and losses, you can deduct a net capital loss against ordinary income only up to $3,000 a year ($1,500 if married filing separately) under IRC §1211(b). The rest is not lost: it carries forward indefinitely under §1212(b), keeping its short-term or long-term character. A short-term carryover stays short-term and a long-term carryover stays long-term, and the $3,000 you do deduct comes out of short-term losses first. The limit is the same for 2025 and 2026.
2026 and 2025 Capital Loss Carryover Parameters
Capital Loss Deduction and Carryover — IRC §1211/§1212 Parameters
| Item | Tax Year 2026 | Tax Year 2025 |
|---|
| Annual deduction vs ordinary income | $3,000 | $3,000 |
| Annual limit if married filing separately | $1,500 | $1,500 |
| Inflation indexing of the limit | None (fixed since 1978) | None (fixed since 1978) |
| Carryover period (individuals) | Indefinite | Indefinite |
| Carryback (individuals) | None | None |
| Character preserved on carryover | Yes (§1212(b)) | Yes (§1212(b)) |
| Loss offset against capital gains | Unlimited | Unlimited |
| Wash sale window (§1091) | 30 days before / 30 days after | 30 days before / 30 days after |
| Reporting | Schedule D + Form 8949 | Schedule D + Form 8949 |
The $3,000 ($1,500 MFS) deduction limit in IRC §1211(b) and the indefinite carryover with preserved character in §1212(b) are the same for both years. The One Big Beautiful Bill Act (P.L. 119-21) made no change to the capital loss limitation, the carryover rules, or the wash sale rule. Sources: IRC §1211, §1212, §1091 and IRS Topic 409.
How the Capital Loss Carryover Calculation Works
The tool follows the Schedule D Capital Loss Carryover Worksheet: net by character, apply the $3,000 limit, then split the leftover. For the wash sale rules that decide which losses are even deductible, see the Wash Sale Rule Guide.
Step 1: Net Short-Term and Long-Term Separately Confirmed
Short-term gains are netted against short-term losses to get a net short-term figure (Schedule D line 7), and long-term gains are netted against long-term losses to get a net long-term figure (line 15). Short-term covers assets held one year or less; long-term covers assets held more than one year.
Step 2: Combine for the Net Capital Gain or Loss Confirmed
The two net figures are combined (line 16). If the result is a gain, there is nothing to carry over. If it is a loss, it is a net capital loss, and a net short-term loss can be reduced by a net long-term gain (or vice versa) before anything carries forward.
Step 3: Apply the $3,000 Annual Limit Confirmed
A net capital loss reduces ordinary income only up to $3,000 ($1,500 MFS) for the year under §1211(b). The deduction is also capped at your taxable income before the loss, so a low-income year deducts less. There is no limit on using the loss against capital gains.
Step 4: Carry the Rest Forward, by Character Confirmed
Whatever net loss the $3,000 deduction does not absorb carries forward to next year under §1212(b). The worksheet applies the deduction to short-term losses first, so the short-term carryover shrinks before the long-term carryover. Each part keeps its character indefinitely.
Step 5: Estimate the Tax Saved Confirmed
The current-year deduction reduces ordinary income, so the tool multiplies it by the marginal rate you choose to estimate the tax saved this year. The carryover will save tax in later years as it offsets gains or another $3,000 of income.
Frequently Asked Questions
How much capital loss can I deduct in one year?
After netting all your capital gains and losses, you can deduct a net capital loss against ordinary income only up to $3,000 per year ($1,500 if married filing separately) under IRC §1211(b). Any net loss above that limit is not lost; it carries forward to future years under §1212(b). The $3,000 limit is the same for tax years 2025 and 2026, and the One Big Beautiful Bill Act did not change it.
How does a capital loss carryover work?
A capital loss carryover is the part of a net capital loss that you could not use this year because of the $3,000 annual limit. You carry the excess forward to the next tax year, where it is combined with that year's gains and losses on Schedule D. For individuals the carryover is indefinite, lasting until it is fully used, and it keeps its short-term or long-term character. There is no carryback for individuals; losses only move forward.
Do capital loss carryovers expire?
No. For individuals, a capital loss carryover has no expiration date. It carries forward year after year, offsetting future capital gains in full and reducing ordinary income by up to $3,000 a year, until the entire loss is used. The carryover ends only when it is exhausted or, in most cases, when the taxpayer dies, because capital loss carryovers generally cannot pass to heirs or to a surviving spouse on a separate return.
Does a capital loss carryover keep its short-term or long-term character?
Yes. Under §1212(b), a short-term capital loss carries over as a short-term loss and a long-term capital loss carries over as a long-term loss. The Schedule D Capital Loss Carryover Worksheet tracks the two separately. This matters because in the next year a short-term carryover first offsets short-term gains (which would otherwise be taxed at ordinary rates) and a long-term carryover first offsets long-term gains. The $3,000 current-year deduction is absorbed by short-term losses before long-term losses.
How are short-term and long-term losses netted?
On Schedule D you first net short-term gains against short-term losses to get a net short-term figure, and separately net long-term gains against long-term losses to get a net long-term figure. Then you combine the two. If the combined result is a loss, you deduct up to $3,000 against ordinary income and carry the rest forward. If a net loss of one type is offset by a net gain of the other type, only the remaining overall loss carries over.
What is the wash sale rule and how does it affect my carryover?
The wash sale rule in IRC §1091 disallows a loss if you buy substantially identical stock or securities within 30 days before or after the sale. The disallowed loss is not gone; it is added to the basis of the replacement shares and recovered when you finally sell them. A wash sale therefore reduces your deductible loss for the year, which can lower both your $3,000 deduction and your carryover. This calculator assumes the loss figures you enter are already adjusted for any wash sales. See the
Wash Sale Rule Guide for the full rules.
Is the $3,000 capital loss limit different in 2026?
No. The $3,000 ($1,500 married filing separately) annual limit on deducting net capital losses against ordinary income is the same for tax year 2025 and tax year 2026. It is a fixed statutory amount in IRC §1211(b) that is not indexed for inflation, and the One Big Beautiful Bill Act made no change to §1211, §1212, or the wash sale rule in §1091. The limit has been $3,000 since 1978.
Can a capital loss carryover offset all of my capital gains?
Yes. The $3,000 annual limit applies only to deducting a net capital loss against ordinary income such as wages. There is no limit on using capital losses, including carryovers, to offset capital gains. If you have a large carryover and then realize a large capital gain, the carryover can wipe out the entire gain, and any leftover loss still reduces ordinary income by up to $3,000 and continues to carry forward.
What if my taxable income is too low to use the full $3,000?
If your taxable income before the capital loss deduction is less than the loss you could otherwise deduct, you only deduct what your income can absorb, and the rest stays in the carryover. The Schedule D Capital Loss Carryover Worksheet handles this by limiting the deduction to the smaller of the allowable loss or your income. Entering your other taxable income in this calculator applies the same limit, so a low-income year preserves more of the carryover.
What to Do Next
If You Are Harvesting Losses
Before you sell, make sure the wash sale rule will not disallow the loss. Read the Wash Sale Rule Guide for the 30-day window, substantially identical securities, and the IRA and spouse traps, then enter your adjusted figures here.
If You Carry Margin Interest
Investment interest is deductible only against net investment income, and electing to treat capital gains as investment income changes the math. Run the Investment Interest Expense Calculator before electing.