Capital Loss Carryover - Do long term gains offset short term losses?

[goshgari]

I understand short term losses offset with short term gains.  Long term losses offset long term gains.  I also understand you may carryover a capital loss multiple years, $3000 per year.  

However, what would happen if there is only a short term loss, and a long term gain?

For example, let's assume I have short term capital loss of $30,000 in the year 2020.  Assuming I have no other gains or losses, I can deduct $3000 carryover per year for the next 10 years.  However, what would happen if I have a long term capital gain of $10,000 the following year (2021)?  If I didn't have any short term gains, how do short term losses offset long term gains in taxes with they carryover rule, given they are usually taxed at different rates?  Most, importantly, does TurboTax take all this information into account?

[JotikaT2]

Yes.

The short term capital loss carryover from 2020 can be used to offset the long term capital gain in 2021.

Typically, the short term capital loss carryover would be used to offset the short term capital losses, and the long term capital loss carryover would be used to offset the long term capital losses in a current year.

However, when there is only one type of capital loss being carried over, it can be used to offset the current year capital loss regardless of it is for a short term or long term capital loss.

And yes, TurboTax will know to apply the capital loss carryover accordingly as long as you have the capital loss carryover entered into the program.

Capital loss carryover

Capital loss ordering

[samimi12]

can you offset short term gains with a long term loss ? 

[tagteam]

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@samimi12 wrote:

can you offset short term gains with a long term loss ? 

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Yes, but note that losses from the sale of personal-use property are not deductible.

See https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0

See also https://turbotax.intuit.com/tax-tips/investments-and-taxes/capital-gains-and-losses/L7GF1ouP8

[sallchin]

I saw in your reply:

"However, when there is only one type of capital loss being carried over, it can be used to offset the current year capital loss regardless of it is for a short term or long term capital loss."

I have both types of loss being carried over (long term and short term capital losses). For example if my long term loss carryover is $50,000 (for tax year 2020) and my short term loss carryover is $40,000 (for tax year 2020) and I have a long term capital gain the following year (tax year 2021) of $90,000 (and this is my only capital gain that year), will both the long term of $50,000 and the short term carryover amounts of $40,000 offset the long term capital gain of $90,000 and I will have a net no tax due on the 2021 $90,000 because those gains were fully offset by the combination of the short and long term capital loss carryovers from tax year 2020? And if it does cover this capital gain for 2021 will Turbo Tax handle this carryover deduction correctly? Thank you.

[tagteam]

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@sallchin wrote:

I will have a net no tax due on the 2021 $90,000 because those gains were fully offset by the combination of the short and long term capital loss carryovers from tax year 2020?

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That is correct, and the net, for the purposes of Schedule D in your hypothetical, will be zero.

TurboTax should handle the capital loss carryover from 2020 to 2021 properly.

[a_p78]

If I have capital loss carry forward from previous years. In year 2021, I have both long term and short term capital gains. Will my capital loss carry forward be used to offset my short term gains and then applied to long term gains?

[Mike9241]

your capital loss carryover can be short-term, long-term, or a combination of both. short-term c/o offsets current year short-term gins. long-term c/o offsets current year long-term gains.

you can end up with net STCL and net LTCL. then (1) up to $3,000 of net capital losses can be used to offset other income with STCL used first then LTCL

net STCL and net LTCG. - they're netted. if a net loss  (1) applies

net STCG and net LTCL  - they're netted. if a net loss (1) applies

[gamix]

How about LT loss carry over being applied to future ST gains?  I ask this way because the tax rates are higher for ST gains and it doesn't seem logical one could nullify the higher rate, with a previous LT loss.  This is the opposite of the "ST loss carry forward, offsetting LT gain" condition, which we know is possible.  Thanks.

[JohnB5677]

Once one type of loss is depleted it can be used to offset the other type of loss.

Losses on your investments are first used to offset capital gains of the same type. So, short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. 

Net losses of either type can then be deducted against the other kind of gain.  

Also, see the TurboTax article Capital Gains and Losses

[BrianF1]

I have capital loss carryovers for both short and long term from 2020.  Currently, TT is using the ST Carryover to cover all 2021 ST gains, but the carryover is not exhausted.  It then does the same thing for LT carryover and LT gain.  The LT carryover is exhausted and LT gains still exist.  What it is not doing is taking the remaining ST carryover and apply it to the remaining LT gains.  What am I doing wrong?

[GeorgeM777]

You may not be doing anything wrong.  While the remaining short-term loss is not being used to offset the long-term gains, what is happening to that short-term loss?  For example, in TurboTax online, there is the screen Based on the info you entered, we've calculated your capital loss carryover amounts and such screen shows the capital loss carryover amounts from 2020, and the loss carried forward to 2022. Can you tell if the short-term loss at issue is being carried over to 2022?

The screen referenced above can be found by selecting Income & Expenses, then scroll down the page and select Capital Loss Carryover.

@BrianF1