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CoffeeBreak
Returning Member

Capital Loss Carryover after a move from California to NY

I incurred a significant capital loss in 2020 tax year. I've lived in California for the last 5 years. I'm planning to move to NY by the end of 2021 and I'm wondering whether I will be able to use already realized capital loss from California (capital loss carryover) to reduce my future state taxes for capital gains that I will realize in 2021 and 2022 while living in NYC?

 

Would it be more beneficial for me to use all of the capital loss carryover from California (by realizing some capital gains) before I move out of state?

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7 Replies

Capital Loss Carryover after a move from California to NY

It doesn’t matter in which state the capital loss occurred. The loss follows you wherever you go. Whether you should take the loss in NY or CA depends on your tax bracket for each state. 

CoffeeBreak
Returning Member

Capital Loss Carryover after a move from California to NY

So now that I'm filling my tax return for 2021 (with the use of Turbo tax) my situation is as follows:

  • A big capital loss incurred in 2020 while I was a California resident.
  • I stopped being a California resident and became a NY resident in the September of 2021.
  • I  have close to none capital gains in 2021.

What do I need to do to let Turbo Tax know that I want my whole capital loss carryover to be 'transferred' from California to NYC for the following years (when I expect to have capital gains). I started filling my state taxes and it seems that portion of my capital loss carryover gets assigned to my California state tax return for 2021 (proportionally to the duration of time I was a CA resident in 2021 so around 70-80% of it) and I'm afraid that I will not be able to claim this part of my capital loss carryover on my NY state returns in the following years.

RobertB4444
Employee Tax Expert

Capital Loss Carryover after a move from California to NY

@CoffeeBreak  You don't need to do anything.  On your 2022 return you will be filing as a full year resident of New York.  Your full capital loss carryover will be on your federal return and will transfer neatly to your New York return at that point.

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Capital Loss Carryover after a move from California to NY

What if it's NJ where you move to from CA.  NJ I understand doesn't recognize capital loss carryovers, so I assume I can't do anything with my prior CA capital loss for now.  What if I move back to CA (or another state that recognizes carryovers)?  Will my carried over loss be available again to me then?

AmyC
Employee Tax Expert

Capital Loss Carryover after a move from California to NY

Many states follow the federal and have the same deductions. If you move to one of those states, you would resume the carryover. 

@acools24 

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Capital Loss Carryover after a move from California to NY

Thanks Amy.  Unfortunately I believe NJ is not one of the states that follows the federal for capital loss deduction.  Any insight on if I have a large capital loss in CA, then move to NJ for 2 years (without using capital loss in these years), then move back to CA, will I be able to apply my capital loss for CA taxes?

AmyC
Employee Tax Expert

Capital Loss Carryover after a move from California to NY

Yes to CA. Correct, NJ is different. You would resume the losses on long term holdings as CA follows federal. See CA FTB rules here. If you were a nonresident during any part of the time the loss was generated, then there is a special calculation which is in the instructions for 540 Sch D.

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