Q. I would like to use my standard deduction to offset my income from interest and dividends, and not my capitol loss (as my standard deduction is mostly unused). Is that OK?
A. Yes and No. Simple (and official) answer: No. As others have said, you must enter the full capital loss carry forward. TurboTax (TT) will enter it (up to $3000) on line 7 of form 1040. But if your standard deduction is "mostly unused", TT (and the IRS rules) will effectively adjust (reduce) the amount of capital loss used to calculate taxable income.
Q. How do I show that on the 1040?
A. It doesn't show on form 1040, because reducing income is not technically what happens. Instead, it is reflected in the amount of capital loss carry forward to the next year. All of this happens automatically in TT. You don't do anything, but enter your info normally.
Asking your question differently:
Q. Do I have to use a capital loss carry over?
Basically, you are allowed to use your standard or itemized deductions to reduce your taxable income before having to use your capital loss. Technically, if your standard (or itemized) deduction is greater than your AGI, without the capital loss, then all your capital loss is carried forward. TurboTax can handle it and will prepare a "Capital loss carry forward worksheet" to show the how much of your capital loss that will be carried forward to 2024.
