Have a question about capital loss carryforward (line 7 of 1040)

[ih_ari_2006]

My income BEFORE application of capital loss carryover of $1,500 in line is $5,000.  After applying the carry loss over, the AGI is 3,500.  Is there a way to opt out of using the capital loss of $1,500 in my 1040 line 7, or is it automatically applied?

It seems like a waste to use it up when regardless of if i use it or not, my taxable income will be zero when offset against standard deduction of almost 12,000.  Is there a way to NOT use the capital loss of $1,500 in Turbo Tax? Of course, the main thing is to understand if IRS even allows it.

[Bsch4477 · Accepted solution]

Yes, the capital loss carryover must be reported and used each year. 

[ih_ari_2006]

just to confirm, I do have to use it up and it's mandatory and I can't opt to use it next year, correct?

[Bsch4477]

Correct. 

[Critter-3]

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[Mike9241]

what is your taxable income line 15?  by the reporting rules the capital loss must be shown on line 7 but it will in fact may not be used. Recompute taxable income as if line 7 were zero.  your capital loss will only be used by any positive amount. there should actually be a worksheet computing your capital loss carryover if any to 2024.

[Hal_Al]

Q.  Is there a way to opt out of using the capital loss of $1,500 in my 1040 line 7, or is it automatically applied?

A. It is not optional.  It is automatically applied.  But, as @Mike9241  explained, in your case, it is not "used". 

 TurboTax (TT) will  automatically calculate the carry forward. In your case it will be the full $1500.

Basically you are allowed to use you standard or itemized deductions to reduce your taxable income before having to use your capital loss.  

Another way to say it is: If your standard (or itemized) deduction is greater than AGI, without capital loss, then all the capital loss is carried forward.

One caveat, to getting the full carry over is your dependent status. If you can be claimed as somebody's dependent, you do not get the full $12,950 standard deduction.  A dependent's standard deduction is the greater of $1150 or their earned income + $400. If your $5000 income is other than earned income, a dependent will not get to carry forward the full loss.