What Is a Realized Loss?

What Is a Realized Loss? What It Means and How It Works

By Matthew Frankel, CFP – Updated Nov 16, 2025 at 1:33 AM

Key Points

Realized loss occurs when assets are sold for less than their purchase price.
Realized losses can offset gains, reducing capital gains tax liabilities.
Use tax-loss harvesting strategically to minimize taxes on investment gains.

Not all investment losses are the same. If you own stocks or other investments that are worth significantly less than you paid for them, you have a loss, but it’s only on paper until you decide to sell.

At that point, your losses become realized losses. Here’s an overview of what realized losses are, why it’s important to know the difference between realized and unrealized losses, and what realized losses could mean to you.

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Dice spelling out Buy, Sell, Loss, Profits, and more. — Image source: Getty Images.

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First, if you didn’t have any realized losses, you would have a total of $8,000 in taxable gains. However, your short-term loss would effectively reduce your short-term gain to $1,000. Your $7,000 long-term loss would completely erase your $6,000 long-term gain, and the extra $1,000 could be applied to further reduce the short-term gain. The net result is that selling investments at an $8,000 profit wouldn’t trigger a taxable event whatsoever because you decided to sell some of your stocks at a loss.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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