If your capital losses were greater than your capital gains in a previous tax year, you may have a capital loss carryover. A capital loss carryover lets you use unused losses in future tax years to reduce taxable income and offset future capital gains.
Understanding whether you have a carryover can help you avoid paying more tax than necessary and ensure you're claiming every deduction available to you.
What Is a Capital Loss Carryover?
A capital loss carryover occurs when your net capital losses exceed the amount the IRS allows you to deduct in a single tax year.
For the 2026 tax year, the IRS generally allows you to deduct up to:
- $3,000 of net capital losses against other income if you're filing Single, Married Filing Jointly, Head of Household, or Qualifying Surviving Spouse
- $1,500 if you're Married Filing Separately
Any remaining unused loss isn't lost. Instead, it's carried forward to future tax years until the entire amount has been used.
You can use carried-over losses to:
- Offset future capital gains
- Reduce other taxable income, subject to the annual deduction limits above
Schedule D (Form 1040) is used to report capital gains, losses, and carryover amounts.
How Do I Know If I Have a Capital Loss Carryover?
The easiest way to find out is to review your prior-year tax return.
Check your previous year's:
- Schedule D (Form 1040)
- Capital Loss Carryover Worksheet included with the Schedule D instructions
If your net capital loss was greater than the annual deduction limit, the unused portion may have been available to carry forward into the following tax year.
The Capital Loss Carryover Worksheet calculates the amount that can be applied to your current return.
How Do I Enter a Capital Loss Carryover in the Program?
Capital loss carryovers are not automatically transferred unless carried forward from a prior-year return in the software. If you're entering the amount manually, follow these steps:
- Go to Federal
- Select Income (Select My Forms)
- Choose Investments
- Select Capital Loss Carryover
Enter the carryover amount from your prior-year Capital Loss Carryover Worksheet.
What Happens If My Income Is Less Than the Carryover Amount?
If your taxable income is lower than your available capital loss carryover, any unused loss remains available for future years.
Example
Assume you have:
- Taxable interest income: $221
- Capital loss carryover: $3,000
- No other income
You may deduct the allowable capital loss on your tax return. Because only $221 of income is available to offset, the remaining loss is not lost.
In this example:
- Available loss: $3,000
- Used this year: $221
- Remaining carryover: $2,779
The unused $2,779 can be carried forward to a future tax year, where it may be used to offset capital gains or other income, subject to IRS limitations.
Where Can I Find My Capital Loss Carryover?
If you have a capital loss carryover, look for the Capital Loss Carryover Worksheet in your prior-year tax return PDF.
This worksheet shows:
- Your original capital loss
- The amount used in prior years
- The remaining loss available to carry forward
Keeping a copy of this worksheet each year can make future tax filing much easier.
Additional Information
For more details about capital gains, capital losses, and carryovers, see IRS Publication 544, Sales and Other Dispositions of Assets. It provides guidance on how capital losses are calculated and carried forward from year to year.