Confusing Long/Short term carryover rules

[alx]

Hello, 

Reading a bunch of articles about Long/Short term capital gains offsetting and carryover it's not clear what is the situation on:

- How much short / long term capital losses can you carry over to next year.

- How much carry-over short / long term losses can you apply per year in subsequent years (to regular income and/or new short/long term capital gains).

- What does the $3000 / year rule (for single filing) apply to ?

Basically I'm wondering the following (Assuming the rules for 2019 apply to all years):

2019:

- 100k Income

- 50k Short term capital loss

- 40k Long term capital loss

2020:

- 100k Income

- 30k Short term capital gain

- 20k Long term capital gain

2021: 

- 100k Income

Q1: In 2019 I think can only offset 3k the loss against the 100k income, but from which loss, the 50k sort-term or the 40k long-term ? Can I choose ?

Q2: In 2020, will I be able to deduct the full 30k short term gain & 20k long term gain from the last year's losses ? Is there a limit on how much I can deduct per year ?

Q3: In 2020, I'll again be able to offset 3k of normal income against last year's capital loss, right ?

Q4: In 2021 I'll again be able to offset 3k of normal income, correct ?

Q5: Does the $3000/yr rule exclusively apply to the offsetting of regular income ?

For Q2, Turbotax seems to allow me to deduct the entire loss from last year against this year's gain.

Thanks!

[TomYoung · Accepted solution]

Q1: Short term losses are used first.  You can't choose.

Q2: Yes and there is no limit to how much can be used against realized capital gains.

Q3: Yes

Q4: Yes

Q5: Not sure what you're asking, exactly.  Carried forward capital losses are first applied to net capital gains.  If there's loss left over after that netting amount then $3,000 of the remaining capital loss is allowed to be used to offset "ordinary" income.

Q2 addendum: You're preparing a tax year 2019 income tax return in 2020 so apparently your "2019" numbers are referring to the 2018 tax year, and your "2020" numbers are referring to the 2019 tax year.  So what you're seeing is the "netting" process. 

[fanfare]

the simplest way is to just let the software calculate the new numbers using the worksheet and not worry about it. If your loss remains over 3000, you'll get the 3000 deduction one way or another.

[LUEXEMA]

I understand how the $3000 limit per tax year works for long term capital loss, but your software is not allowing my deduction this year. 

Prior to 2018 I used TurboTax software, but had a CPA prepare my 2018 return in 2019.

Inherited property in 2009; sold in 2018 for $85,000 (Value = $103,811).  Total loss = 18,811.  Deducted $3000.

Manually filled out tax forms for 2019 =  Deducted $3000.

Have new computer, so able to use TurboTax again:  Software gives an error on the "sold" date of 10/03/2018, saying the property had to be sold in 2020.

So cannot file for my $3000 deduction for 2020.

Please HELP me to enter the data properly.

Signed [email address removed]

[TomYoung]

Well, TurboTax is right, you can't enter a sale that occurred in 2018 in a 2020 income tax return.  And, because you didn't use TurboTax last year it can't simply transfer the remaining capital loss from the 2019 income tax return.  You have to enter the capital loss remaining as of 12/31/19 yourself.

Here's where you do that in the desktop program.  I assume the online program is similar: