Why is it that the (US) government can tax 100% of capital gains but you can only claim $3000 in losses annually?

Question

Why is it that the (US) government can tax 100% of capital gains but you can only claim $3000 in losses annually?

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Answer 1

Because that’s how the law is written.

Now for *why* it’s written that way – the tax laws are intended to raise revenue, so there’s incentive to minimize deductions and maximize rates.

The cap on deductions also discourages massive “tax loss harvesting” during down years in the market. We’ve all lost 25% this year, but there’s no real tax reason to sell everything to lock in the losses for 2022.

If you could carry over and write off enormous losses, wealthy people would be on a selling spree right now.