If you had filled a 2018 tax return, and had zero income after deductions other than the Capital Loss Carryover, you will be able to carry the full $40,000 to 2019.
Your capital loss carryover is reduced by the amount of capital loss that was actually used to reduce your taxable income, not by the amount of capital loss deduction shown on your tax return. In figuring this amount, you’re allowed to use all other deductions before using the capital loss deduction.
This rule is reflected in a Capital Loss Carryover Worksheet that appears in the instructions for Schedule D and also in IRS Publication 550, Investment Income and Expenses.
To correct Capital Loss Carryover:
- Income
- Scroll to Investment income
- Select Capital loss Carryover
- Make your correction.
You are allowed a maximum capital loss in any one year of $3,000, and any excess loss can be carried forward to future years to offset gains. Each subsequent year also has a maximum loss limitation of $3,000.
There is no limit to the number of years you can carry a capital loss forward. However, you are not allowed to carry a capital loss back to a year before the capital loss occurred.
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