Capital loss carryover

[susan777]

I have a huge capital loss carryover and sold my house last year.  I was hoping to use my big carryover to offset the capital gain on my house after I get the $250K exemption.  It looks like it's only allowing me a $3000 loss.  Is that right?  I thought carryover losses could offset all the gains..... Thanks.  I file Head of Household.

[HelenC12]

No, not all losses are created equal. Your home was your personal asset. Personal losses are not deductible. 

Here's the IRS rule: Personal-use property:  Generally, property held for personal use is a capital asset. Gain from a sale or exchange of that property is a capital gain. Loss from the sale or exchange of that property is not deductible. You can deduct a loss relating to personal-use property only if it results from a casualty or theft.

 

[VolvoGirl]

The max 3,000 loss on your tax return is after all the current gains have been offset by the Capital Loss Carryover from 2019.

On the income page The 2020 column shows the carryover to 2021 (not your current loss for 2020).  Schedule D doesn't actually show the carryover amount. To find your  Capital Loss Carryover amount  you need to look at your  return schedule D page 2.  Line 16 will be your total loss and line 21 should be a max loss of 3,000.  The difference between line 16 and 21 is the carryover loss for next year.

There is also a Carryover Worksheet showing the carryover from the prior year and the current amounts.  Then there is also the Capital Loss Carry Forward worksheet showing the amount transferring over to next year.

In the Online version you have to save your return with all the worksheet as a pdf file to your computer to see the Capital Loss Carry Over and Carry Forward worksheets.

In the Desktop program you can go to Forms and find it in the list in the left column.

[Critter-3]

LOOK at the form 8949 and Sch D carefully ... did the home sale show up at all on those forms ?   If not did you enter the sale correctly AND click on the 1099-S box ?   

[susan777]

Hi thanks.  Yes, home sale showed up on both the 8949 and Schedule D.  It's showing a gain of about $19000 but I have way more than that as capital loss carryovers.  I thought previous losses could offset current gains....not just the $3000.  Also, shouldn't the new home I purchased ( which was less than the sale price of my old home) factor in to the equation?  I did not receive a 1099-S

[susan777]

Hi thanks for your response.  I didn't lose money on the sale of my home.  I had a gain.  I'm trying to offset the gain with my capital loss carryover, but it's only allowing $3000.  I thought you could offset current gains with previous losses.

[VolvoGirl]

Yes read my post above again.  3,000 is the max Loss you can take each year AFTER you apply the Capital Loss Carryover to the current year gains.

No the new home purchase does not figure into it at all.  It doesn't matter anymore what you do with the sale proceeds.

[Critter-3]

First the purchase of a new home means nothing on an income tax return ... what you did with the proceeds of the sale is immaterial.

Now ... look at the Sch D again ... do you see the carryover of the prior year loss  AND  the sale of the home ? Do you see the gain on the home ?  Review the sale of home worksheet and see if the gain is reflected correctly.

 Do you have some more loss after the gain on the sale is covered ?  Look at line 16 ... is the total loss more than $3000?  If so you only get to take up to $3000 of cap loss on your return against ordinary income.  

[susan777]

Hi, thanks for your response.  That is exactly the essence of my question. I thought ALL capital gains in a year could be offset by previous losses, (from the capital loss carryover)  not just the $3000.  Isn't that the point of the previous losses?

[VolvoGirl]

Yes.  Where are you seeing only 3,000?  I'll try explaining another way.  After you used up all the loss against the gains do you still have some loss left over to carryover to next year?

[Critter-3]

Please look at the Sch D ... which lines have what amounts ?  

[susan777]

thank you.  That's what I thought.  So it doesn't look like Turbo tax is applying my prior losses to the current gain.  Technically, I should have no gain, because my losses were applied and then my carryover losses would be reduced by the amount of my gain, Right?  How do I make turbo tax do the offset?  Shouldn't it do it automatically?

[VolvoGirl · Accepted solution]

Yes I think it is doing it.  It did offset ALL the gain.  But you still have some loss left over.  So you get to use 3,000 of the remaining Loss on your tax return.  Then if you still have more unused loss left over it carries over to next year.

[susan777]

The -$3000 is showing up on the 1040 page 1

[VolvoGirl]

Right!  The 3,000 loss is AFTER it applied the carry over to all your gains.  It's right.  Your carryover loss has been reduced by the gains.  Now you still have some of the carryover left over.  You only get to take a net 3,000 loss on your tax return.  

Maybe we can explain it better using your real numbers.  Say you had a 250,000 Capital Loss Carryover from 2019.  Minus the 190,000 gain equals a 60,000 loss remaining.  You can only deduct 3,000 of the 60,000 Loss each year so you will have 57,000 left to carry over to next year 2021.