I had a sizable short term capital loss in 2021. I understand I can carryover $3k per year until it’s used up. However, if I have a short term capital gain in 2022 that’s in excess of $3k, can I use more of the capital loss carryover, or does that $3k cap apply no matter what?
The $3,000 limit is the amount of capital loss carryover that can be used to offset ordinary income. There is no limit on how much of the carryover can be used to offset capital gains.
For example, suppose you have a $20,000 capital loss carryover from 2021 to 2022. If you have a net capital gain of $5,000 in 2022, $5,000 of the capital loss carryover will be used to offset the capital gain. In addition, another $3,000 of the capital loss carryover will be used to offset other income (assuming that you have at least $3,000 of other income). So in this example, a total of $8,000 of the capital loss carryover would be used in 2022. The remaining $12,000 would be carried over to 2023.
Strictly speaking, it's not really correct to say that the capital loss carryover "can" be used in a certain way. Saying "can" makes it sound like it's optional. There is no choice about how a capital loss carryover is used. The calculations must be done in accordance with the tax law, and there is only one way to do it. The capital loss carryover must be carried from year to year, and it will be used as specified in the tax law.
any 2022 net capital gains will be offset by your capital loss carryover. if there's still a loss up to $3,000 can be used in 2022 with any excess carried over to 2023
The $3,000 limit is the amount of capital loss carryover that can be used to offset ordinary income. There is no limit on how much of the carryover can be used to offset capital gains.
For example, suppose you have a $20,000 capital loss carryover from 2021 to 2022. If you have a net capital gain of $5,000 in 2022, $5,000 of the capital loss carryover will be used to offset the capital gain. In addition, another $3,000 of the capital loss carryover will be used to offset other income (assuming that you have at least $3,000 of other income). So in this example, a total of $8,000 of the capital loss carryover would be used in 2022. The remaining $12,000 would be carried over to 2023.
Strictly speaking, it's not really correct to say that the capital loss carryover "can" be used in a certain way. Saying "can" makes it sound like it's optional. There is no choice about how a capital loss carryover is used. The calculations must be done in accordance with the tax law, and there is only one way to do it. The capital loss carryover must be carried from year to year, and it will be used as specified in the tax law.
Hi,
Very concise answer! Just one clarifying question.
Does a capital loss carryover offset unearned but taxable income, such as military pension benefits and US Treasuries interest? Specifically, I have a sizable capital gain in 2024, but, unfortunately, a more sizable capital loss carryover from 2023. Will $3k of that excess carryover be applied against my unearned income?
Yes, after the Loss is netted against any current year Gains you can still take 3,000 against all your other income.