Net capital losses are allowable to offset net business income as well as other income reported on your form 1040, but only up a maximum of $3,000 per year. For example, if you sold a stock and had a loss of $7,000 and sold another one and had a gain of $3,000, you would have a net capital loss of $4,000 for the year. If you had net business income of 10,000 and that was your only other income, you could deduct $3,000 capital loss from the net business income and you would have $7,000 of taxable income for the year. Then, you would carry over the unused capital loss of $1,000 to the next year.
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