Capital Loss Carryover

[IggyL]

I know how to process capital gains and capital losses, and how to carryover excess losses if they exceed gains.  I am looking for a way to CARRYFORWARD losses completely, without using any to offset this year's gains.  I know that businesses do it all the time to potentially offset future tax liability from future gains.  I can't find a proper way NOT to deduct capital losses on an individual return, so all of the losses are carried forward.

[NCperson]

why would you want to do that? what is the advantage? 

[IggyL]

The advantage would be writing the loss off in the future, if one expects to be in a higher tax bracket then.

[NCperson]

I think you are thinking this backwards, you'd want to defer deductions if you believed you'd be in a HIGHER tax bracket in a future year. 

Regardless, gains and losses have to be reported in the year they were incurred.  The way to have managed this was to holding on to the losing asset until a future year when you were in a higher tax bracket and then sell.

p.s. capital gains tax brackets are not that progressive.  It's normally 15% unless your ORDINARY income is VERY high or VERY low so being in a higher or lower bracket than 15% is not overly common (but it can occur)

[IggyL]

I misspoke earlier - I meant to say "if one will be in a HIGHER bracket".  If you run a small business, for example, you can choose not to deduct a loss in a year it occurred, and carry it FORWARD up to 7 years and decide when to do it.  I was looking for a way to do it properly on an individual return, not on business one.

The reasons are quite simple: one could be on 10% bracket in a current year (was a student most of the year, had little income) but knows that he will be in 36% bracket next year, because he will have lots of income.  It makes total sense NOT to deduct any losses now, and hold on to them until next year, if possible.

[NCperson]

I understand your thought process.  However you are required to report the TRANSACTION in the year it occurs.  So if you want to sell the gain this year and sell the loss in a future year, then there is no issue with that.  The IRS is not going to let you manage the tax you owe unless the asset remains at risk (in other words, if your strategy is to sell the loss in a future year, you are still at risk for losing even more).  But you can't sell the security (whether for a gain or a loss) and then decide not to report it until a future year; if you have a NET capital gains loss, that can be carried forward but you can't manufacture the loss carry forward loss by reporting the gains and not reporting the losses.  You CAN manufacture the loss carry forward, by SELLING the gains and NOT selling the losses. 

Note, generally speaking, there are only 3 LONG TERM capital gains tax brackets (2018 SINGLE brackets listed)

0% - if your ORDINARY income plus CAPITAL GAINS is below $38,600. 

15% if your ORDINARY  income plus CAPITAL GAINS exceeds $38, 600 and is below $425, 800

20% if your ORDINARY income plus CAPITAL GAINS exceeds $425,000

[IggyL]

@NCperson Could you please tell me whether you are a tax professional? It feels to me, you are making a ton of assumptions about my situation that are incorrect (that the losses are long term, that they have to do with sales of securities, etc.)
I have been doing my taxes for longer than I'd like to admit, since the days of paper forms filled out with a pen and calculator, so I certainly don't need an education on the basics. You also mentioned the word "manufacturing" when talking about gains and losses. Nobody is planning to manufacture anything, the capital loss (short term, not involving securities) has already occured, so there's nothing to plan. The IRS most certainly DOES allow not taking the loss in the year it occurred, and deducting it in a future year for BUSINESS tax reporting. So, my original question was whether there was a similar provision for personal returns.
If you do know the answer for sure, one way or the other, I would appreciate a reference to a specific IRS publication explaining that.

[NCperson]

see page D-4 of the Schedule D reporting instructions:

"Be sure to report all of your capital gains and losses even if you can't use all of your losses in 2018."

https://www.irs.gov/pub/irs-pdf/i1040sd.pdf

[LudwigVan_fan]

The short answer is no, there is not the same rule for individuals as there are for say corporations.  If I remember correctly, a corporation cannot deduction a capital loss against its ordinary income, only against capital gains.  For individuals, capital loss of up to $3000 is allowed against ordinary income, except if it creates and NOL, and other exceptions as specified.

[LudwigVan_fan]

The advantage would be writing the loss off in the future, if one expects to be in a lower tax bracket then.

That doesn't make sense to me.  Deducting a loss when you are in a higher marginal bracket is more advantageous than taking a loss when you are in a lower marginal bracket.

[NCperson]

The original post actually came from the opposite direction... if you are in a low tax bracket now and sitting on capital losses can you defer offsettinf tve losses against your gains to a future period when you are confident you would be in a higher tax bracket and would them offset the losses against other gains

And the answer is that per the IRS (documented here and in other threads) , you must report all transactions in the year they occurred and you must take the $3000 each year against ordinary income

“You can’t have your cake and it it too” - if you sell the stock st a loss you must report it in year. If you want to stay at risk (not sell the stock), then certainly you can defer the losses until a future year when those losses may be greater or less and sell the stocks them

[VolvoGirl]

I don't understand if you are talking about business losses or investment losses.

For capital losses.......YOU CAN NOT WAIT TO USE THE LOSS!
You have to deduct up to 3,000 (1,500 MFS)  loss per year after any gains you have.  The rest you will have to carryover until it is used up.

You have to report the carryover every year until it's used up.  You can't skip a year.  Even if you don't report it on your return you have to reduce it by the 3,000 (1,500 MFS) when you carry it over to next year.  You can't choose when to use it.

This is from the IRS Pub 550 page 68 middle of last column:
"When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable deduction into account, whether or not you claimed it and whether or not you filed a return for the current year. "

Here is pub 550…  http://www.irs.gov/pub/irs-pdf/p550.pdf

[dickbrown074]

I still hav a 50,000dollar Hurricane loss carryover. How is that entered to get the deduction.  

[dickbrown074]

M wife and I are both retired and only have our retirement income

[dickbrown074]

Neither of us will live long enough to use up the total remaining deduction of 3,00 per year