What is a capital loss carryover?
How do I know if I have a carryover loss?
To know if you have a capital loss carryover, start by reviewing your prior-year tax return, specifically Schedule D (Form 1040). If your capital losses in that year exceeded your capital gains and the excess was greater than the annual deduction limit ($3,000 or $1,500 for married filing separately), any unused losses would be carried forward to the next tax year.
The carryover amount is calculated using the Capital Loss Carryover Worksheet found in the instructions for Schedule D. This worksheet helps determine how much of the unused loss from the previous year can be applied to the current year. You can use this carryover to offset current-year capital gains or deduct up to the allowable annual limit against other income.
How do I carry the loss forward?
To enter this into our program please follow this path:
• Federal section
• Income
• Schedule D/Form 8949
• Capital Loss Carryover
What if my income is less than the carryover amount?
Example: Individual has taxable interest of $221 and no other income. He also has a carryover loss of $3,000.
If the capital losses exceed the taxable income, the unused loss can be carried over to the next tax year. In this given scenario, with taxable interest of $221 and reporting a capital loss of $3,000, the individual can deduct $3,000 on the 1040 form. Since the customer could only use $221 of the loss to offset their income, the remaining $2,779 ($3,000 - $221) would be carried over to the next tax year
In the above example, the customer will need to add the $2779 they could not take to the amount they carryover to the next year.
Refer to Publication 544 for more information.