Carryover Loss

[BrerGoose]

From my 2018 taxes I still had $40,000 capital loss caryover.

Typically, each year I use $3,000 as a deduction against ordinary income.

But in 2019, I had no income and didn't file a return.  In 2020, I am filing a return.

What happens to the caryover loss ?  Do I lose the ENTIRE $40,000 ?  Or do I only lose $3,000, leaving me with $37,000 carryover for 2020 ?

[JohnB5677]

If you had filled a 2018 tax return, and had zero income after deductions other than the Capital Loss Carryover, you will be able to carry the full $40,000 to 2019.

Your capital loss carryover is reduced by the amount of capital loss that was actually used to reduce your taxable income, not by the amount of capital loss deduction shown on your tax return. In figuring this amount, you’re allowed to use all other deductions before using the capital loss deduction.

This rule is reflected in a Capital Loss Carryover Worksheet that appears in the instructions for Schedule D and also in IRS Publication 550, Investment Income and Expenses.

To correct Capital Loss Carryover: 

1. Income
2. Scroll to Investment income
3. Select Capital loss Carryover
4. Make your correction. 

You are allowed a maximum capital loss in any one year of $3,000, and any excess loss can be carried forward to future years to offset gains. Each subsequent year also has a maximum loss limitation of $3,000.

There is no limit to the number of years you can carry a capital loss forward. However, you are not allowed to carry a capital loss back to a year before the capital loss occurred.

[BrerGoose]

I filed in 2018. I did not file in 2019.  What happens in 2020 ?

After 2018, I had $40,000 carryover that would have gone to 2019 if I had filed. 

What goes to 2020 ?  Nothing ?  Or do I subtract $3,000 for 2019 and carryover $37,000 to 2020 ?

[ColeenD3]

Please go to this LINK to see the full answer by HalAl.

The actual is answer is more complex. Although you have to report it, it may not all get wasted (used). The best thing to do is prepare a tax return (even if you aren't required to file) to accurately calculate the carry over to the next year.

[BrerGoose]

I had actually looked at that thread before I posted.  But the key difference in my question is that I did not file in 2019.

So do I lose the entire $40,000 because I skipped filing in 2019 ? 

Or do I lose at most $3,000 of the carryover, and get to keep at least $37,000 for 2020 ?

[VolvoGirl]

You have to report the carryover every year until it's used up.  You can't skip a year.  Even if you don't report it on your return you have to reduce it by the 3,000 (1,500 MFS) when you carry it over to next year.  You can't choose when to use it.

This is from the IRS Pub 550 page 66 middle column....

"When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable deduction into account, whether or not you claimed it and whether or not you filed a return for the current year. "

Here is pub 550…  http://www.irs.gov/pub/irs-pdf/p550.pdf

[Hal_Al]

Simple answer: the entire $40,000 carries forward to 2020, if you had no income in 2019.

You do not have to use up $3000 each year.  Technically you should calculate how much woulda been used if you had prepared a tax return.  But for somebody with 0 income, that amount is 0.

The link referenced above refers to pre 2018 tax law (despite the 2019 date on the post).  There at no longer personal exemptions.  The simple now rule is: If your standard (or itemized) deduction is greater than AGI, without capital loss, then all the capital loss is carries forward. 

This confirms what JohnB5677 said earlier (he just referred to the wrong years): "If you had filed a 2019 tax return, and had zero income after deductions other than the Capital Loss Carryover, you will be able to carry the full $40,000 to 2020".

[BrerGoose]

Thanks for those who have taken the time to respond.

Everyone seems to focus on the $3,000.  But I would be ok with losing $3,000 of the carryover. 

I just don't want to lose the remaining $37,000 because I didn't file in 2019.

I was worried that the IRS would require me to file in 2019 to preserve the bulk of the carryover to 2020.

[VolvoGirl]

Go ahead and enter it.

Enter a Capital Loss Carryover under

Federal Taxes or Personal (Home & Business)

Wages and Income

Then scroll down to Investment Income

Capital Loss Carryovers - Click Start or Revisit

[sts_66]

I have a different issue - I had a $2696 capital loss carryover from the prior year, but in the carry forward worksheet TurboTax is showing zero in the 2020 carry forward loss (line 13 of 2020 worksheet), while line B, capital loss carry forward from 2019, shows that -$2696 loss. Why is Turbotax not allowing me to carry forward the unused cap loss?

[VolvoGirl]

How much are your current 2020 gains?  If you didn't have any losses then the whole 2696 is used up on your 2020 return.  Check 1040 line 7.

You get to first offset the loss against any gains you have each year so that can use more of it up.  Then after applying the loss to the current gains you can take a max loss of 3,000 (1,500 MFS)per year.  Turbo Tax does all the calculations for you.  Just enter the prior year carryover amount.

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.

[sts_66]

I had $630 in short term cap gains in 2020 (1040 line 7 and Sch D pg 2 line 16), line 21 on Sch D pg 2 is blank. I have no earned income, don't pay income taxes, only get non-taxable SSDI benefits, only had a little interest income and ordinary dividend income, no long term cap gains in 2020. Cap loss carryovers aren't supposed to be "use or lose", but my 2020 return show no carryover losses on Sch D. On the 2020 Capital Loss Carryforward worksheet lines 2 and 13 under "regular tax" carryover loss is blank, but under the "AMT Tax" column it shows $2077 (2019 and 2020 worksheets both show that number in the AMT column), line 9 is zero for first column and $2696 for the AMT column. Just looked at that worksheet from my 2019 taxes and now I'm really confused - line 9 and line 13 show zero carryforward for 2020 regular taxes, but under AMT tax lines 9 and 13 show $2969, and again line 2 under AMT it shows $2077. So the question is do I actually still have a cap loss carryover for 2021 or not - I believe I should?

[Hal_Al]

deleted

[VolvoGirl]

@Hal_Al   Several posts up he said  "I had a $2696 capital loss carryover from the prior year,...."  Which I tried to explain.  

[Tinka81]

just curious. what happens if there was no taxable income for 2020, does the full carryover loss go into 2021 ?  even though both 2019 and 2020 had no taxable income.