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Comment by josephlord | Hacker News Reader

If you make a $100,000 loss on an investment and the next year make a $100,000 profit on a (different) investment you can point to the loss and point out that overall you have made no profit and therefore are liable for no tax. Obviously each loss can only be used once.

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Is that true? Again, I'm not an accountant, so it's an honest question. I was always under the impression that you can write down that $100,000 loss only $3,000/year. So the 2nd year, you'd have $97,000 profit to be taxed on.

I think you can take up to $3K/year in losses if you have no gains. So if you have 0 gains, you adjust your income down by $3K. If you have 10K in gains, you can negate out that 10K. That's my early morning understanding of it though.

In the US, capital losses can be applied to capital gains without any such limit. Perhaps you are thinking of the amount of carried forward cap loss that can be applied to offset ordinary income.

Yes, it's generally true. Capital losses can generally be used to offset subsequent capital gains, or up to $3000 of ordinary income a year.

I think he's asking if your initial 1k becomes 200k and you lose 100k from the 200k, can you use that loss of 100k to offset before you have been taxed on the 199k gain.

That is a possible reading although I'm not sure if it was the intended one. That would just be a 1k loss that you could carry forward.

I am not a lawyer, accountant or American.

No; you can't lose more than your principal. So your initial 1k would be all you "lost". UNLESS you locked those gains in by paying taxes on them; though in that case you would just be re-collecting tax you already paid very slowly...

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