Each year, you are limited to $3000 capital loss carryover amount to be applied to your current year net income, as long as you have $3000 unused capital loss to be carried over to the current year return.
If you do not have enough net income on your return to utilize that unused capital loss carryover, then a worksheet is prepared and the unused amount will be carried over to the next year.
Per IRS Topic No. 409:
Limit on the Deduction and Carryover of Losses
If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 21 of Schedule D, Form 1040.
If your net capital loss is more than this limit, you can carry the loss forward to later years.
Figuring your carryover.
The amount of your capital loss carryover is the amount of your total net loss that is more than the lesser of:
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Your allowable capital loss deduction for the year, or
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Your taxable income increased by your allowable capital loss deduction for the year.
If your deductions are more than your gross income for the tax year, use your negative taxable income in figuring the amount in (2) above.
Complete Worksheet 4-1 to determine the part of your capital loss that you can carry over.
Since the 2020 Pub 550 is not yet available, we can use the 2019 pub 550 for additional information on the capital loss carryover worksheet.;
