topic Can ordinary losses offset capital gains? in Investors & landlords

Can ordinary losses offset capital gains?

v3ritatis — Tue, 10 Feb 2026 11:02:52 GMT

I've been unable to find a good answer to this question. Can ordinary losses offset capital gains? I know capital losses can only offset capital gains or $3k in ordinary gain, but what about the other way around? The ordinary losses were reported on a Form 4797.

Re: Can ordinary losses offset capital gains?

Mike9241 — Thu, 22 Feb 2024 03:42:12 GMT

yes. A $50K capital gain can be offset by say a $30K nonpassive loss from your sole proprietorship. net $20K Not all ordinary losses can offset since there are special rules as to the deductibility of passive and other losses.

Re: Can ordinary losses offset capital gains?

v3ritatis — Thu, 22 Feb 2024 05:33:21 GMT

Really appreciate your help. Would losses for my day trading as a sole prop count? I have 475(f) MTM for securities. I would like to offset gains from 1256 contracts that have 60/40 capital gains tax. Lets say I have $50K in gains from trading 1256 contracts this year, but $20k in loss from trading securities last year with market to market (losses previously reported on 4797). Would this count as 30k in gains?

Re: Can ordinary losses offset capital gains?

RobertB4444 — Mon, 04 Mar 2024 15:35:05 GMT

Yes. You said that you have set your day trading up as a sole proprietorship. If that has ordinary losses (and we'll go with your numbers although you didn't include any business expenses there) of $20,000 and then the only other income on your return was $50,000 in ordinary income from short term gains then yes, the net is $30,000 in taxable income.

@v3ritatis