I know this is probably a stupid question, but this is my first year trading with profits in the 10's of thousands. (I've traded for 4 years, but with 4 to 5k, little to no net profits, and not really paying attention to taxes) My question is about the $3000 loss write-off limit. Is this for a deduction of a years net loss, or for total losses? Example; Lets say you have total gains and losses at: $50,000 Gains $20,000 Losses ---------- $30,000 Net Gains Under basic short-term capital gains rates, do you pay taxes on $30,000, or $50,000-$3000(min deduction) = $47,000? If its the latter, that is really screwed up, because theoretically you could owe more in taxes than you made during the year! (make 1mil, loose 900k, pay taxes on 997k???) For some reason I always assumed that it was a deduction of your net yearly loss... But it suddenly dawned on me that I may have been underestimating the evilness of the IRS. I know this question was really dumb, but thanks for any help.