Capital Loss carryover is calculated incorrectly (Desktop Premier, Mac)

[zenitram2]

I'm carrying over a large loss from previous years. It should only apply $3,000 of that loss to the capital gains I got in 2025. But instead it is applying the whole amount (over $35,000) to my large 2025 capital gains (over $90,000). 

I have sent a diagnostic file to TurboTax. This looks like a bug to me. Please advise.

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[rjs · Accepted solution]

It's not a bug. You misunderstood the rules for capital loss carryover. The capital loss carryover is applied first to offset any net capital gain in the new year. If there is still unused capital loss (because the loss was more than the gains), up to $3,000 of the remaining loss is applied against ordinary income. Any remaining loss after that is carried over to the next year. If the capital loss carryover is less than the net gain in the new year, the entire loss is used to offset the gains. TurboTax is doing the calculation correctly.

The $3,000 is a limit on the amount of capital loss that can be used to offset ordinary income. It is not a limit on the amount of capital loss that can be used to offset capital gain.

[Mike9241]

you are incorrect. if current year's net capital gains exceed the prior year's capital loss carryover, the entire carryover is applied to the current year's gains not just $3,000. $3,000 of net capital losses is just the limit of what you can deduct against other income. 

[VolvoGirl]

Another way to put it.....the $3,000 is the max loss you can take AFTER applying the carryover to the current gains.  Didn't you want to use all the carryover up?  

Each year you get to first offset the carryover loss against any gains you have each year so that can use more of it up. Then after applying the loss to the current gains if there is still a loss, you can take a max loss of 3,000 per year.  

And you can't skip a year.  

[rjs]

@zenitram2 

Please note that you have no choice about how or when your capital loss carryover is used. The carryover loss must first be used to offset any gains. There are no options. You cannot defer using the loss, or use only part of it. There is only one way to do the calculation. TurboTax does the calculation as required by the tax law.

[zenitram2]

Thank you. I guess I misunderstood the rules. And I'm happy that the correct answer actually works in my favor.