topic Re: Carryover loss in Deductions & credits

EIC and investment income

d2jpatel — Sat, 02 May 2020 18:00:58 GMT

If you have investment income more then $3650, you do not get EIC. Let’s say i have $4000 as interest income and i have previous year carryover loss of $5000 from stock. So does my investment income would be $4000-$3000 = $1000 or it’s remain same as $4000 and do not get any EIC?

Re: EIC and investment income

Critter — Sat, 02 May 2020 19:19:50 GMT

Look at worksheet 1 for your answer :

https://www.irs.gov/publications/p596#en_US_2019_publink1000297452

Re: EIC and investment income

d2jpatel — Sat, 02 May 2020 19:27:01 GMT

Thank you! But i did not fill the forms yet. Just straight question. Looking for straight answer of the scenario I described.

Re: EIC and investment income

Hal_Al — Sat, 02 May 2020 20:27:08 GMT

Q. So is my investment income $4000-$3000 = $1000 or does it remain $4000 and I do not get any EIC?

A. Simple answer: it remains $4000 and you do not qualify for EIC

Line 5 of the referenced worksheet says "Enter the amount from Form 1040 or 1040-SR, line 6. If the amount on that line is a loss, enter -0-

Re: EIC and investment income

d2jpatel — Sat, 02 May 2020 20:35:22 GMT

Thank you! Then where that loss applied?

Re: EIC and investment income

d2jpatel — Sat, 02 May 2020 20:39:56 GMT

This is from turbotax

“If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income, for example.....”

https://turbotax.intuit.com ›

Re: EIC and investment income

VolvoGirl — Sat, 02 May 2020 20:46:53 GMT

It is on 1040 line 6 and subtracted off your total income and reduces your AGI Adjusted Gross Income.

You don't get a refund for losing money. It just reduces your total income so you get taxed on a lower amount. If you were already getting back all that you could a loss won't increase it. And by reducing your income it can reduce any credits you are getting.

2019 Capital Gains and Losses go on Schedule D then to 1040 line 6

And If you have a net loss for the year you can only deduct 3,000 (1,500 MFS) max on your tax return. The rest you have to carryover to next year. You have to report the carryover every year until it's used up. You can't skip a year.

Re: EIC and investment income

d2jpatel — Sat, 02 May 2020 20:52:23 GMT

But interest is invest income then loss on those investment also investment income in -ve. Isn’t it?

Re: EIC and investment income

VolvoGirl — Sat, 02 May 2020 20:58:54 GMT

1099 INT interest income goes on 1040 line 2 and 1099 DIV dividends go on line 3. Int&Div go on Schedule B. They are separate from schedule D investment sales and capital gains.

Re: EIC and investment income

d2jpatel — Sat, 02 May 2020 21:06:28 GMT

Correct. But when they calculate the investment income why can’t you subtract net loss from your investment income? Both are investment income. Isn’t it?

Re: EIC and investment income

VolvoGirl — Sat, 02 May 2020 21:19:03 GMT

To qualify for the EIC credit? Look at Worksheet 1 on this page. It's very simple. Just enter your 4,000 interest on line 1. Then on line 5 you can't enter your loss. It only lets you enter zero, not less. So it is not subtracted from investment income to qualify for EIC. Sorry.

https://www.irs.gov/publications/p596

Re: EIC and investment income

VolvoGirl — Sat, 02 May 2020 21:20:18 GMT

That is how they wrote the rules. You have to ask your congressman.

Re: EIC and investment income

d2jpatel — Sat, 02 May 2020 21:28:29 GMT

So basically you put your money on CD then you are screwed. Bank used your money and made lots of money and you loose your EIC. Always fool the people. 😔🤔

Re: EIC and investment income

Critter — Sat, 02 May 2020 22:05:36 GMT

Sorry ... I don't feel your pain ... if you have enough in savings that it made $4000 at the current interest rates then you really don't need the EIC ... it is meant for those without means which you obviously have.

Re: EIC and investment income

d2jpatel — Sat, 02 May 2020 22:21:23 GMT

I wish. But I don’t. I just used an example.

Re: EIC and investment income

Hal_Al — Sat, 02 May 2020 23:05:22 GMT

You say "I just used an example". Change the details of your example and the answer could be different.

When it comes to taxes, it's never simple. Hence, the complicated worksheet to calculate your investment income for purposes of the EIC.

Yes, your $3000 carry over loss reduces your taxable income, for purposes of calculating your income tax. That is, it reduces your total income. But, you're not allowed to target it to your interest income alone.

However, let's use a different example: what if you had a $4000 capital gains distribution (still investment income), on a form 1099-Div, instead of $4000 of interest on a 1099-INT. Then you would only have $1000 of net investment income and your EIC would not be eliminated.

Huh? How can that be? Because the capital gains distribution goes on Schedule D, where it is directly reduced by the capital loss carry forward before it ends up on line 6 of form 1040.

That ain't fair? But, it's the law. Knowing you had that loss carry forward, you shoulda coulda switched your investment from an interest bearing account to a stock mutual fund.

Re: EIC and investment income

d2jpatel — Sat, 02 May 2020 23:05:37 GMT

Thank you! Correct.

Re: Carryover loss

mirvetpal — Fri, 07 Apr 2023 13:13:31 GMT

can carryover loss be used against Interest Income?

Re: Carryover loss

Hal_Al — Fri, 07 Apr 2023 13:44:24 GMT

Q. Can carryover loss be used against Interest Income?

A. No. At least, not directly against interest. It is applied to your total income, including your interest income. It also can not be used directly against dividends, even so called "qualified dividends".

It can be used directly against capital gains distributions, from mutual funds, shown in box 2a of a 1099-DIv. TT will handle that automatically.

Re: Carryover loss

BrittanyS — Fri, 07 Apr 2023 13:32:52 GMT

Yes, but there are limits to how the carry-over losses can be used. Losses must be applied to gains of the same type first, and then the following applies:

If you have $2,000 of short-term loss and only $1,000 of short-term gain, the net $1,000 short-term loss can be deducted against your net long-term gain (assuming you have one).
If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income.
Any excess net capital loss can be carried over to subsequent years to be deducted against capital gains and against up to $3,000 of other income.
If you use married filing separate filing status, however, the annual net capital loss deduction limit is only $1,500.

What is a capital loss carryover?

Capital Gains and Losses

@mirvetpal