How Much Stock Loss Can You Deduct? The $3,000 Limit Hasn't Changed Since 1978

November 12, 2026

You can deduct stock losses against capital gains without limit, and then up to $3,000 of any remaining net loss against wages and other ordinary income each year ($1,500 if married filing separately). That $3,000 figure took effect in tax year 1978 and has never been adjusted; measured by the Consumer Price Index, it would be about $15,530 in October 2026 dollars. This piece walks through where the number came from, how a large loss is used up year by year, and where the cap's real value sits against its own 48-year history.

Key takeaways

Net capital losses offset ordinary income only up to $3,000 a year ($1,500 married filing separately); the rest carries forward with no expiration.
The $3,000 cap dates to tax year 1978. Adjusted by CPI-U (65.2 then, 337.511 in October 2026), it would be about $15,530 today, so the cap has kept roughly 19% of its original purchasing power.
A $20,000 net loss with no offsetting gains takes seven tax years to deduct; in the 22% bracket that is $660 a year.
A House bill introduced October 1, 2026 (H.R. 10690) would raise the cap to $14,250 and index it, but it is a proposal, not law.

Figures checked: November 12, 2026.

How much stock loss can you deduct in one year?

There are two layers. First, capital losses offset capital gains dollar for dollar with no ceiling. A $40,000 loss on one position fully cancels a $40,000 gain on another. Second, if losses exceed gains, the excess can reduce other income, but only within a limit. IRS Topic No. 409, last reviewed November 9, 2026, puts it this way: the deductible excess "is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 16 of Schedule D."

The statutory source is section 1211(b) of the Internal Revenue Code. Anything above the limit is not lost. Under section 1212(b) the unused amount moves to the next tax year, keeps its short-term or long-term character, and can keep rolling forward indefinitely. In the following year it again offsets gains first and then up to $3,000 of ordinary income.

The dollar value of the deduction depends on the bracket. Under the IRS's 2026 inflation adjustments, the 22% bracket for a single filer covers taxable income over $50,400 and up to $105,700, so a full $3,000 deduction lowers that filer's federal tax by $660. In the 12% bracket it is worth $360, and in the 24% bracket $720.

Where did the $3,000 limit come from?

The cap is older than most of the tax code investors deal with today, and its dollar amount was last raised by a law signed in 1976. The milestones below come from the amendment notes to section 1211, a Congressional Research Service history of capital loss treatment, and a Joint Committee on Taxation background document.

Law	What changed for individual investors
Revenue Act of 1934	First limitation on deducting capital losses in excess of capital gains
Revenue Act of 1942	Offset against ordinary income set at $1,000 a year, with a five-year carryforward
1964	Five-year carryforward replaced by an unlimited one
Tax Reform Act of 1969	Only 50% of net long-term losses could offset ordinary income, for tax years beginning after December 31, 1969
Tax Reform Act of 1976	Limit raised to $2,000 for 1977 and $3,000 for tax years after 1977
Tax Reform Act of 1986	The 50% haircut on long-term losses eliminated, for tax years beginning after December 31, 1986

Two things stand out. The dollar cap tripled in two years in the 1970s, from $1,000 to $3,000, after sitting unchanged for 34 years. And since 1987 a dollar of long-term loss has counted as a full dollar against ordinary income, which was not true from 1970 through 1986. The number itself, though, has not moved in 48 tax years, and unlike tax brackets and the standard deduction it is not indexed to inflation.

What would $3,000 from 1978 be worth today?

The Bureau of Labor Statistics' CPI-U averaged 65.2 in 1978 (1982-84=100). The October 2026 reading, published November 10, 2026, was 337.511. The ratio is 5.177, so $3,000 of 1978 purchasing power equals about $15,530 now. Run the other way, today's $3,000 cap buys what roughly $580 bought in 1978.

That is where the present sits in the cap's own history: at the bottom. Because the nominal figure is frozen and prices have risen in nearly every year since, the cap's real value has trended down for its whole life and is now about 19 cents on the 1978 dollar. No earlier year in the series was lower. CRS made the same calculation with older data and put the indexed figure at about $13,000 as of its 2022 update; four more years of inflation have added roughly $2,500 to that.

The cap matters most in the years after markets fall. IRS Statistics of Income preliminary data show that 13,587,995 individual returns claimed a net capital loss for tax year 2022, a bear-market year, up 67.8% from 8,097,885 for 2021. The amount deducted was $29.11 billion, or about $2,142 per return, an average pulled down by filers whose net loss was under the cap.

How long does it take to use up a $20,000 loss?

Consider a hypothetical single filer in the 22% bracket who realizes a $20,000 net capital loss in 2026 and has no gains in later years. The deduction schedule is mechanical:

Tax years 2026 through 2031: $3,000 deducted each year, $18,000 in total, worth $660 a year at 22%.
Tax year 2032: the final $2,000, worth $440.
Total federal tax reduction: $4,400, spread over seven returns, assuming the bracket does not change.

Now change one fact. Suppose the same investor realizes a $10,000 gain in 2027. The carryover entering 2027 is $17,000. It absorbs the entire $10,000 gain, then another $3,000 of ordinary income, leaving $4,000. That clears with $3,000 in 2028 and $1,000 in 2029. One gain shortened the timeline from seven tax years to four. That is the practical point of the two-layer rule: carried losses are consumed far faster by gains than by the annual cap.

The trade-off is that the value of an offset depends on the rate the gain would have faced. For 2026, long-term gains are taxed at 0% for single filers with taxable income up to $49,450. A carryover spent against a gain that would have been taxed at 0% saves nothing on that gain, and the ordering rules do not let a filer skip gains and save the loss for later.

How does the wash sale rule limit loss harvesting?

Selling a losing position in November or December to realize the loss is a common year-end step, and section 1091 restricts it. The IRS instructions for Schedule D describe a wash sale as selling stock or securities at a loss and acquiring substantially identical ones "within 30 days before or after the sale or disposition." In that case the loss is not deductible now. It is added to the cost basis of the replacement shares, so it is postponed, not erased.

The window covers 61 days in total, counting the sale date. An investor who sells on December 15 and repurchases the same stock on January 5 has a wash sale even though the trades fall in different tax years. Reinvested dividends and automatic purchases inside the window can trigger the rule on part of the position.

There are costs on the other side as well. Staying out of the position for 31 days means missing whatever it does in that time, in either direction. Switching into a different holding changes the portfolio's exposure. And harvesting lowers the basis of what is eventually bought back, which means a larger taxable gain later. The benefit is mostly one of timing, plus the rate difference when a loss offsets ordinary income taxed at 22% while the future gain is taxed at a long-term rate.

Could Congress raise the limit?

A bill to do so is pending. H.R. 10690, the Capital Loss Inflation Fairness Act, was introduced in the House on October 1, 2026 by Rep. Norman and referred to the Ways and Means Committee. Its text would replace $3,000 with $14,250 ($7,125 for married individuals filing separately), index the figure to inflation for later years, and apply to tax years beginning after December 31, 2025. Nothing in the introduced text changes the rules for a 2026 return unless it is enacted.

Under that proposal the $20,000 example would clear in two tax years, $14,250 and then $5,750, instead of seven. The argument against a higher cap is also on the record. CRS describes the limit as a guard against selective realization: investors choose when to sell, so they can take losses immediately while letting gains run untaxed, and an unlimited deduction would let that pattern shelter wages. A higher cap also delivers most of its benefit to households with large taxable portfolios.

The reasoning this article would apply is conditional. If a taxable account holds positions below cost this month, the $3,000 deduction is the smaller part of the decision; the larger part is whether there are realized gains this year or likely gains in the next few years for the loss to absorb, because that is what determines how quickly a carryover turns into tax actually saved. Planning around a higher cap that has not been enacted would be a mistake, since a seven-year schedule is the current law. This is general education, not individual tax advice; a tax professional can apply these rules to a specific return.

FAQ

How much stock loss can you write off per year?

Losses offset capital gains without limit. If losses exceed gains, up to $3,000 of the excess ($1,500 if married filing separately) can be deducted against other income each year. Any remainder carries forward to later years.

Do capital loss carryovers expire?

No. For individuals the unused net capital loss carries forward indefinitely under section 1212(b) and keeps its short-term or long-term character. A five-year limit applied before 1964.

Why is the capital loss limit only $3,000?

Congress set it at $3,000 for tax years after 1977 in the Tax Reform Act of 1976 and has not changed or indexed it since. In October 2026 dollars the 1978 figure is about $15,530. The limit exists to keep investors from deducting losses freely while deferring gains.

How many years does it take to deduct a $20,000 capital loss?

With no capital gains to absorb it, seven tax years: $3,000 in each of six years and $2,000 in the seventh. Realized gains in any of those years use up the carryover faster, as in the example where a $10,000 gain cut the schedule to four years.

What is the wash sale rule in simple terms?

A loss is disallowed if substantially identical stock or securities are acquired within 30 days before or after the sale. The disallowed loss is added to the basis of the replacement shares, so the deduction is delayed until those shares are sold.

Sources

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