I have worked my way through this thread.
I still do not understand something in regards to having to use “carry over loss” from previous years when your taxable income is below the Standard Deduction.
On one hand this thread states, and the IRS also states, one does not need to use any of the “carry over loss” if the taxable income is Zero. Since “taxable income” does include capital gains, it would follow, that when you subtract that capital gain income ( line 7 of 1040) from the standard deduction you end up with Zero taxable income on line 15 of 1040 . Therefore, no carry over loss is used.
But it is also stated , that the “carry over loss” has to be netted against capital gains. Is this always the case, even if your capital gains are the only income you have, and the amount is less than the standard deduction?
Is the IRS saying (without stating it), yes, a person can carry forward all “carry over loss” when then have Zero taxable income EXCEPT when they have capital gains ? That would translate into the fact that my only income of $5000 capital gain MUST deducted from their carry over loss that year.
Example: If one enters the capital gain 5000 $ into line 7 of the 1040 as the only income all my carry over seems preserved as my taxable income is Zero after the Standard Deduction. However, if I must fill out Schedule D and enter my capital gains on line 13, that Schedule D forces me to NET the entire capital gain $5000 (my only income) against the entire carry over loss from previous years ($ 9000) ,not even just 3000$. It appears doing the latter cannot be undone on the worksheet.
