How much can a taxpayer claim to lower their income if their capital losses exceed capital gains in a given year?

When a taxpayer experiences capital losses that exceed their capital gains, they can utilize those losses to offset other income, thus lowering their taxable income. The IRS allows individuals to deduct a maximum of $3,000 in net capital losses against other types of income, such as wages or salaries, in a given tax year.

If the total net loss from capital investments—after accounting for any capital gains—is more than $3,000, the taxpayer can only deduct up to $3,000 in that tax year. Any remaining losses can be carried forward to subsequent years to offset income in those years. This rule is designed to provide taxpayers with relief from the tax burden due to investment losses while also ensuring that the deduction is capped at a reasonable limit.

The other options do not accurately reflect the IRS rules for capital loss deductions, reinforcing why $3,000 is the correct and applicable limit for reducing taxable income when capital losses exceed gains.