Capital Losses

A capital loss occurs when an asset is sold for less than its cost basis. Losses offset capital gains for tax purposes, and in the United States up to 3,000 dollars of net capital losses can additionally be deducted against ordinary income each year, with any remainder carried forward to future years indefinitely.

Why it matters

Losses have real economic value in a tax system that taxes gains. Tax-loss harvesting, the practice of selling losing positions to bank the deduction and offset winners, is a standard year-end discipline for taxable investors. For securities, the wash sale rule disallows the loss if a substantially identical asset is repurchased within 30 days, which forces harvesters to either wait out the window or accept tracking error in a substitute position.

In the gold vs bitcoin debate

Because bitcoin is classified as property rather than a security in the United States, the wash sale rule has historically not applied to it, allowing holders to sell at a loss and repurchase immediately while keeping the deduction, though legislators have repeatedly proposed closing this treatment. Bitcoin's volatility makes such opportunities frequent. Physical gold held directly sits in similar territory, while gold ETFs and mining shares are securities and fully subject to the wash sale restriction.