can i offset real estate capital gains with stock losses?

Can I Offset Real Estate Capital Gains with Stock Losses?

Core question: can i offset real estate capital gains with stock losses? Short answer: in general, yes — realized capital losses from stocks can be used to reduce taxable capital gains from the sale of real estate, but several special rules (depreciation recapture, home‑sale exclusions, 1031 exchanges, passive‑activity limits, wash sales, and carryforward/ordinary‑income limits) may change the practical outcome.

As of 2026-01-18, according to IRS guidance (Topic No. 409 and Publication 544) and commonly used tax‑planning literature, the basic netting framework allows capital losses from securities to offset capital gains from most capital assets, including real property — but the character of gains and special real‑estate rules control tax treatment and what is actually offset on your return.

Basic concepts — capital assets, gains vs losses

can i offset real estate capital gains with stock losses? Before answering that question step‑by‑step, it helps to define key terms:

• Capital asset: property owned for investment or personal use; common examples include stocks, bonds, rental property, and a primary residence. Different tax rules apply depending on the asset type and how it was used.
• Capital gain: the excess of sale proceeds over adjusted basis (purchase price plus allowable adjustments). A gain is realized when you sell or dispose of the asset.
• Capital loss: when the sale proceeds are less than adjusted basis.
• Short‑term vs long‑term: holding period matters. If you held the asset for one year or less, gains/losses are short‑term (taxed at ordinary rates). If held for more than one year, they are long‑term (subject to preferential long‑term capital gains rates in many cases).

Why this matters: can i offset real estate capital gains with stock losses? Yes, but the tax rate and ordering depend on whether gains/losses are short or long‑term and on any special classifications for real‑estate recognition.

General netting rules for capital gains and losses

The IRS follows a multistep netting process when you have capital gains and losses in a tax year. Understanding this order is crucial to answering: can i offset real estate capital gains with stock losses?

1. Separate short‑term and long‑term gains and losses. Net short‑term gains against short‑term losses; net long‑term gains against long‑term losses.
2. If one side (short or long) is a net gain and the other a net loss, combine the results to get an overall net capital gain or loss.
3. If you end with a net capital loss, you can use up to $3,000 ($1,500 if married filing separately) of that loss to offset ordinary income in the year (wages, interest, etc.). Any remaining net capital loss carries forward to future tax years indefinitely until used.

Practical consequence: a realized stock loss (short‑ or long‑term) is generally eligible to offset a capital gain from real estate, subject to the netting order above. Thus, can i offset real estate capital gains with stock losses? Yes — but the timing and character of each position matter.

How netting affects tax rates

• Net short‑term capital gains are taxed at ordinary income rates. If stock losses reduce net short‑term gains, that reduction avoids ordinary‑rate tax.
• Net long‑term capital gains are taxed at preferential rates (0%, 15%, or 20% for most taxpayers, with an additional 3.8% NIIT for some high‑income filers). Losses that reduce net long‑term gains lower tax liability at those preferential rates.

Example: if you have a $50,000 long‑term gain from a rental property and a $30,000 long‑term loss from equities, the net long‑term gain is $20,000 — taxable at long‑term rates. The losses reduced the taxable gain dollar for dollar (subject to special real‑estate rules discussed below).

Special rules that affect real estate gains

Answering can i offset real estate capital gains with stock losses requires attention to special categories of gain that receive different tax treatment or are recognized differently.

Depreciation recapture (Section 1250 / Section 1245)

When you sell depreciable real property used for business or rental, part of the gain may be "recaptured" — taxed differently because you claimed depreciation deductions while owning the property.

• Section 1245 recapture: generally applies to certain personal property and may be taxed as ordinary income to the extent of prior depreciation.
• Unrecaptured Section 1250: residential rental real‑property depreciation recapture treated as capital gain, but taxed up to 25% (a special rate for unrecaptured Section 1250 gain).

Can stock losses offset recapture? Capital losses from stocks can offset capital gains, including the portion of a gain characterized as unrecaptured Section 1250 (because it is technically a capital gain item). However, if recapture is treated as ordinary income (Section 1245 or other situations), capital losses generally cannot offset that ordinary‑income component beyond the general $3,000 ordinary income offset limit provided for excess capital losses.

Key point: identify the character of each component of the property sale (ordinary recapture vs capital) to know whether stock losses will fully offset the taxable amount.

Sale of a primary residence (Section 121 exclusion)

A qualifying primary residence sale allows an exclusion of up to $250,000 of gain for single filers and $500,000 for married filing jointly under Section 121, if ownership and use tests are met.

• If the Section 121 exclusion eliminates or reduces the recognized gain, there may be little or no gain left to offset with stock losses.
• If a portion of the gain is excluded, only the recognized portion remains available to offset other capital losses.

Thus, can i offset real estate capital gains with stock losses when the property is a principal residence? Only against the recognized gain after applying the exclusion.

Like‑kind exchanges (Section 1031) and other nonrecognition transactions

A valid Section 1031 like‑kind exchange defers recognition of gain by rolling basis into replacement property. If no gain is recognized in the tax year, there's nothing for stock losses to offset.

• If gain is deferred via a nonrecognition transaction, stock losses cannot offset a recognized gain that does not exist.

Passive activity and loss limitations

Many rental properties generate passive income or losses. The passive activity loss rules (often referred to as PAL rules) can constrain the use of rental losses and may affect whether losses from real estate itself can offset nonpassive gains.

• Passive activity losses generally can only offset passive income. Suspended passive losses are carried forward and can be used when there is passive income or when you fully dispose of the passive activity in a taxable sale.
• Capital gains from the sale of the property where you dispose of the entire activity may allow previously suspended passive losses to be released and applied.

How this impacts the central question: can i offset real estate capital gains with stock losses? Passive‑activity limitations typically restrict real‑estate losses from offsetting other nonpassive income; but stock capital losses (which are generally nonpassive) still fit into the capital netting rules — however, if the real‑estate gain arises from a passive activity sale and suspended passive losses exist, you must handle passive rules first to determine recognized gains/losses and suspended loss release.

Wash sale rule and replacement purchases

A common tax‑loss harvesting strategy is selling losing stock positions to realize losses that offset gains. But the wash sale rule disallows a loss if you acquire "substantially identical" stock or securities within 30 days before or after the sale.

• If you trigger a wash sale, the disallowed loss is added to the basis of the replacement shares rather than deductible in the current year.
• To preserve loss deductibility for the purpose of offsetting real‑estate gains, avoid repurchasing substantially identical securities within the 61‑day window surrounding the sale.

Practical techniques include buying a similar (but not substantially identical) ETF/ETF share class, using broad‑market funds that are not "substantially identical," or waiting 31+ days — with the caveat that short‑term market risk is real.

Ordinary income offset limit and carryforwards

If total capital losses exceed total capital gains in a year, you can use up to $3,000 ($1,500 MFS) of the excess loss to reduce ordinary taxable income in that tax year. Any remaining unused losses carry forward indefinitely until fully used.

Implications for can i offset real estate capital gains with stock losses:

• If stock losses are larger than real‑estate gains, the remainder (after the $3,000 ordinary offset) becomes a carryforward that can offset future capital gains from real estate or other assets.
• Because carryforwards keep their character (short‑term vs long‑term) for ordering purposes, careful tracking matters when you later offset a real‑estate sale.

Practical tax‑planning strategies

Below are common, legal strategies taxpayers use to manage the interaction between stock losses and real‑estate gains. These are informational — consult a tax professional for personalized advice.

• Tax‑loss harvesting in taxable accounts: realize losses on equities to offset gains in the same tax year. When implementing, avoid wash sale triggers and document trades carefully for cost‑basis reporting.
• Timing sales: accelerate or postpone asset sales (stock or property) to maximize offset in a particular tax year. For instance, if you expect a significant real‑estate gain, you might harvest stock losses earlier in the year to ensure recognized losses exist when the property sale is reported.
• Use of carryforwards: if large stock losses cannot be used fully in the year of occurrence, carry them forward to offset future real‑estate gains.
• Consider nonrecognition strategies: if the goal is to avoid recognition of real‑estate gain, explore valid Section 1031 exchanges (real property only) or the primary‑residence exclusion where applicable; these reduce recognized gain and change the need for offsetting losses.

Because Bitget helps users manage crypto and investment exposure, you can think about maintaining economic exposure when harvesting losses by moving into non‑substantially identical positions or using Bitget Wallet for secure custody when you change holdings. (This is a platform reference and not tax advice.)

Implementation considerations (replacement investments, basis tracking)

• Replacement investments: when you sell a stock to harvest a loss, choose an investment that maintains similar exposure but is not "substantially identical" to avoid wash sales.
• Basis tracking: if a wash sale occurs, the disallowed loss adjusts basis of replacement shares — this must be tracked to avoid misreporting. Broker cost‑basis reporting may reflect adjustments, but keep your own records.
• Brokerage reporting: sales of securities generate Form 1099‑B, and sales of property may produce Form 1099‑S; match those to Form 8949 and Schedule D when preparing your return.

Reporting and forms

When you realize stock losses and real‑estate gains, the primary IRS reporting forms include:

• Form 8949 — Sales and Other Dispositions of Capital Assets: lists individual sales transactions and adjustments (including wash sale adjustments).
• Schedule D (Form 1040) — Capital Gains and Losses: aggregates short‑ and long‑term results and computes net capital gain/loss.
• Form 4797 — Sales of Business Property: used when property sold is business property and ordinary income recapture applies.
• 1099‑B (brokerage) and 1099‑S (real‑estate closing statements): source documents for reporting.

Reference IRS Topic No. 409 and Publication 544 for examples and detailed rules. As of 2026-01-18, these IRS sources remain core references for capital gain/loss reporting.

State tax and Net Investment Income Tax (NIIT) considerations

• State taxes: state treatment of capital gains and losses varies. Some states follow federal netting exactly; others have differences in rates or treatment. Always check state rules to determine the after‑tax benefit of offsetting gains with stock losses.
• NIIT (Net Investment Income Tax): high‑income taxpayers may be subject to a 3.8% NIIT on net investment income (including certain capital gains). Offsetting gains with capital losses can reduce NIIT exposure in addition to federal income tax.

Because state tax rates and NIIT thresholds change the arithmetic, factoring both federal and state consequences into planning is important.

Examples (brief illustrative scenarios)

Below are short numeric examples to illustrate how the netting rules and special real‑estate rules affect outcomes. In each example, assume the taxpayer is otherwise eligible and that no wash sale adjustments apply.

1. Straightforward long‑term netting

• Scenario: You sold a rental property after long‑term ownership for a $50,000 long‑term capital gain (no depreciation recapture or exclusion). Earlier in the year you sold company stock at a $30,000 long‑term capital loss.
• Result: long‑term capital net = $50,000 − $30,000 = $20,000. You report $20,000 of long‑term capital gain on Schedule D and pay the applicable long‑term capital gains tax rate on $20,000.
• Lesson: can i offset real estate capital gains with stock losses? Yes; the long‑term stock losses offset the long‑term real‑estate gain dollar for dollar.

1. Depreciation recapture component

• Scenario: Same sale above yields $50,000 total gain, of which $10,000 is unrecaptured Section 1250 (taxed up to 25%) and $40,000 is ordinary long‑term capital gain. You have $45,000 of long‑term stock losses.
• Result: Apply losses to long‑term capital items: $45,000 loss offsets $40,000 long‑term gain fully and reduces the unrecaptured Section 1250 $10,000 to $5,000 net (recall unrecaptured Section 1250 is a capital gain component). Net taxable capital gain left = $5,000 (taxed up to 25%). You used $45,000 of losses; no ordinary‑income recapture amounts were left to offset.
• Caveat: if part of the recapture were treated as ordinary income (Section 1245), capital losses cannot offset that ordinary component except under the general $3,000 rule.

1. Losses exceed gains and $3,000 ordinary limit

• Scenario: You realize $10,000 long‑term capital gain from selling a home (after applying any Section 121 exclusion) and $50,000 net capital loss from equities.
• Result: Net capital loss = $50,000 − $10,000 = $40,000. In the current year you can use $3,000 of that to offset ordinary income; the remaining $37,000 carries forward indefinitely to offset future capital gains.

These simplified examples show why character, ordering, and special exclusions matter when answering can i offset real estate capital gains with stock losses.

Limitations, risks, and IRS anti‑abuse considerations

• Market risk: harvesting losses by selling investments alters your portfolio and exposes you to reinvestment risk. Avoiding wash sales by switching to similar assets may change risk/reward.
• IRS scrutiny: transactions lacking a bona fide business or investment purpose, entered solely to generate tax benefits, may attract IRS attention. Maintain economics and document investment intent.
• Ordinary income recapture: some portions of property sale gains may be taxed as ordinary income (e.g., certain depreciation recapture); capital losses from stocks do not offset ordinary income amounts beyond the $3,000 limitation.

When to consult a tax professional

If you are asking can i offset real estate capital gains with stock losses and your situation involves any of the following, consult a CPA or tax attorney:

• Large dollar‑value property sales or complex depreciation histories
• Ownership through partnerships, S‑corporations, trusts, or foreign entities
• Passive activity loss suspensions or material participation questions
• Nonresident status or multi‑state tax issues
• Potentially triggering the NIIT or AMT consequences

A professional can model federal and state tax differences and help you execute loss harvesting while complying with wash sale and reporting rules.

Additional resources and references

As of 2026-01-18, key references include IRS Topic No. 409 (Capital Gains and Losses) and IRS Publication 544 (Sales and Other Dispositions of Assets), together with IRS guidance on home sales under Section 121 and on depreciation recapture rules. Practitioner guides and reputable tax‑planning articles (tax preparation software guidance, brokerage tax‑loss harvesting guides, and investment‑manager writeups) are also useful.

Sources referenced in this article include: IRS Topic No. 409; IRS Publication 544; IRS FAQ on sale of home; practitioner and brokerage guides on tax‑loss harvesting; SmartAsset and Jackson Hewitt overviews; AQR analysis on capital‑loss offset mechanics; and community Q&A summaries such as TurboTax discussions. (All sources consulted are public tax guidance or practitioner commentary.)

Summary and next steps

can i offset real estate capital gains with stock losses? In most cases, yes — capital losses from stocks can offset capital gains from real‑estate sales under the IRS netting rules. But special real‑estate rules (depreciation recapture, the primary residence exclusion, like‑kind exchange nonrecognition, and passive activity limits), the wash sale rule for securities, and the $3,000 ordinary‑income offset limit can materially change the result for a given taxpayer.

If you are planning a property sale and want to use stock losses to reduce tax this year, consider these next steps:

• Review the character of the expected property gain (depreciation recapture, capital vs ordinary) and whether exclusions apply.
• If you hold losing equity positions and wish to harvest losses, plan trades with wash‑sale avoidance and document basis adjustments.
• Model federal and state tax effects and NIIT exposure.
• Talk with a tax professional for complex cases.

For those who manage crypto or securities and want a reliable custody or trading platform while implementing tax‑aware strategies, explore Bitget and Bitget Wallet for secure holdings and trading tools as you execute portfolio adjustments. Learn more about Bitget’s trading and wallet features to support systematic tax‑loss harvesting and position management.

Sources used (high‑level)

• IRS Topic No. 409 — Capital Gains and Losses (federal guidance as of 2026-01-18)
• IRS Publication 544 — Sales and Other Dispositions of Assets (federal guidance)
• IRS FAQ on sale of home (Section 121 exclusion)
• Fidelity guidance on tax‑loss harvesting and brokerage guidance
• Jackson Hewitt and SmartAsset explanatory materials on capital gains and passive losses
• AQR practitioner piece on capital losses and real‑estate gains
• Community Q&A items (TurboTax) and tax‑planning writeups

Note: This article is educational and does not constitute tax, legal or investment advice. For personalized guidance tailored to your facts and circumstances, consult a qualified tax professional. To manage trades or custody of assets used in tax‑loss harvesting, consider Bitget and Bitget Wallet as part of your investment operations.