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I have read in multiple places that you can use investment losses of up to $3,000/year against your taxes.

  • Is this as a deduction or credit? Does it count as an addition to itemized deductions or is it a separate deduction?
  • Are short vs long term losses any different for tax purposes?
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Related: Tax consequences of short term capital losses

The net capital loss is a deduction, not a credit, and it is a separate item (Schedule D) from your standard deduction, meaning you can take the standard deduction and also deduct up to $3,000 in capital losses.

The nature of the loss (short-term or long-term) is used to calculate your net capital gain.

If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.

References:

  1. IRS Topic 409
  2. IRS Publication 550
  3. littleadv's answer to above-linked question

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