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prophsoft1
New Member

How much prior year capital losses can offset future gains with?

I have over $200,000 in prior year capital losses from short and long term stocks.  How much am I able to use every year to offset capital stock gains?
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Accepted Solutions
Hal_Al
Level 15

How much prior year capital losses can offset future gains with?

All of it, up to the actual amounts of your gains for the current year. You can then deduct $3000 against ordinary income (on line 13 of form 1040). It doesn't matter if the current year gains are long or short term, the loss carry over is applied to all gains.

So, for example, if you have $50,000 in gains this year, your schedule D and line 13 of form 1040 will show a net $3000 loss and $147,000 will carry forward to next year.

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15 Replies
Hal_Al
Level 15

How much prior year capital losses can offset future gains with?

All of it, up to the actual amounts of your gains for the current year. You can then deduct $3000 against ordinary income (on line 13 of form 1040). It doesn't matter if the current year gains are long or short term, the loss carry over is applied to all gains.

So, for example, if you have $50,000 in gains this year, your schedule D and line 13 of form 1040 will show a net $3000 loss and $147,000 will carry forward to next year.

VolvoGirl
Level 15

How much prior year capital losses can offset future gains with?

So in that example if you have 50,000 in current gains you can use up 53,000 of the carryover loss.
dlyon
New Member

How much prior year capital losses can offset future gains with?

Is there any time limit for carrying over capital losses from prior years to future gains? Hypothetical example: Can you use capital loses from year 1 against year 5 gains as long as a loses still exist after being counted against capital gains for the years inbetween 1 and 5.

Example: Lossed 100k year 1

Gained 10k year 2 carry 90k year1 to year 3 offset to 0
Gained 10k year 3 carry 80k year 1 to year 4 offset to 0
Gained 10k year 4 carry 70k year 1 to year 5 offset to 0
Gained 70k year 5 Losses from year 1 offset Gains for 0

In the example above i left the 3k income exemption off intentionally for simplicity sake.

Can you do the above, or will a loss expire? Does the same apply for Wash Sale except minus the income deduction?
Hal_Al
Level 15

How much prior year capital losses can offset future gains with?

No. you must use $3K of the loss each year. A carry forward does not expire (except on death). It cannot be used against a wash sale.
Example $100K carry over loss from year 1.
10K of gains in year 2, 10K off set on schedule D, 3K loss claimed on form 1040 and  87K carries to year 3
10K of gains in year 3, 10K off set on schedule D, 3K loss claimed on form 1040 and 74K carries to year 4
10K of gains in year 4, 10K off set on schedule D, 3K loss claimed on form 1040 and  61K carries to year 5
70K gains year 5, 61K offset on schedule D, 9K of capital gains reported on form 1040
TomD8
Level 15

How much prior year capital losses can offset future gains with?

Once a gain is realized, it must be declared on your taxes for that year, and there is no carry forward for capital gains.

You can deduct a maximum of $3,000 of excess capital losses each year.  Excess loss amounts that exceed $3,000 can be carried forward to the following years, deducting $3,000 per year until the loss is exhausted.  You cannot skip a year with losses being carried forward.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
jonkpeterson
Returning Member

How much prior year capital losses can offset future gains with?

if I had $20,000 carry-over short term losses in 2016 and $20,000 short term gains in 2017 ,can I offset the entire $20,000 gain I plan to receive in 2017?
TomD8
Level 15

How much prior year capital losses can offset future gains with?

-deleted-
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
Hal_Al
Level 15

How much prior year capital losses can offset future gains with?

@TomD8  Did you misread the question?
TomD8
Level 15

How much prior year capital losses can offset future gains with?

@Hal_Al : Appreciate your help if my answer was incorrect.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
Hal_Al
Level 15

How much prior year capital losses can offset future gains with?

The entire $20,000 carry over loss, from 2016,  is first applied to any capital gains (short term or long term) on your 2017 return. So, yes, if you have $20,000 in gains,on your 2017 return, They will be wiped out by the carry over loss. The calculations will show on  schedule D.
TomD8
Level 15

How much prior year capital losses can offset future gains with?

@Hal_Al :  Thank you.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
jonkpeterson
Returning Member

How much prior year capital losses can offset future gains with?

thanks.  I was hoping for that answer.  I am hoping to escape the Income Related Monthly Adjustments in Medicare.  The short term gains in 2017, if not offset would put me into a new bracket.
smagyera
New Member

How much prior year capital losses can offset future gains with?

Your response is confusing.  My question is how much of my carryover capital losses can be used to offset gains in the current year?   

 

Your response was "all of it" but then you go on to indicate ONLY $3,000 of prior year losses can be applied against current year capital gains.

 

Which is it?

 

If it is the former (all of it) the following applies: 

 

if I had carry over capital losses of $200,000 from prior year(s), I could use all $200,000 to offset that amount of capital gains in the current tax year.  If my gains in the current year were only $50,000, I could offset the entire $50,000 with carry over losses and carry the remaining $150,000 of my $200,000 prior year carry over losses to next year.  

 

If it is the later ($3,000) the following applies: 

 

if I had carry over capital losses of $200,000 from prior year(s), I could ONLY use $3,000 of the $200,000 to offset my capital gains in the current tax year.  The remaining $197,000 of carry over capital losses would be carried over again.  By this formula, it would take over 65 tax years for me to use all my carry over capital losses to offset capital gains income.

 

You also appear to say something to the effect that I can use carry over capital losses to offset ordinary income.

 

Please clarify:

 

(1) how much of my capital loss carry over from prior year(s) can be used to offset current year capital gains - 100% or $3,000?

 

(2) whether, under what circumstances, and what $ amount of, capital loss carry over from prior year(s) can be used to offset ordinary income in the current year?

Hal_Al
Level 15

How much prior year capital losses can offset future gains with?

Q. (1) how much of my capital loss carry over from prior year(s) can be used to offset current year capital gains - 100% or $3,000?

A. (1) 100%.  All of it can be used against this year's capital gains, long or short term.

 

Q. (2) Under what circumstances, and what $ amount of, capital loss carry over from prior year(s) can be used to offset ordinary income in the current year?

A. (2) . ONLY $3,000 of prior year losses can be applied against other/ordinary (non capital gains) income.  But, the carry forward MUST first be used against current capital gains before being applied to ordinary income. 

 

If you had carry over capital losses of $200,000 from prior year(s), you could use all $200,000 to offset that amount of capital gains in the current tax year.  If  your gains in the current year were only $50,000, you could offset the entire $50,000 with carry over losses and  also claim $3000 against other income; carrying the remaining $147,000 of your $200,000 prior year carry over losses to next year.  You must use the $3000 against ordinary income.  You may not elect to carry it forward. 

 

P.S. I don't see where anyone said "ONLY $3,000 of prior year losses can be applied against current year capital gains".  The $3000 limit is against ordinary/other income.

 

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