If you sold stock or mutual funds at a loss, you can use the loss to offset capital gains you had from similar sales. If the net amount of all your gains and losses is a loss, you can report the loss on your return up to $3,000 — or $1,500 if married filing separately. Losses beyond that amount can be deducted on future returns as a capital loss carryover until the loss is all used up.
For example, if you have a $5,000 capital loss and no gains, you can use $3,000 of the capital loss to deduct against ordinary income. If your ordinary income is $20,000, you will get to deduct the $3,000 of capital loss and only pay tax on $17,000 of ordinary income. The remaining $2,000 of loss can be carried forward to the following year.