Negative income due to capital loss and capital loss carryover for next year

[tomar-gautam2]

Hi!

When I filed taxes in 2023, I had capital loss of around $21k ($7k for short term and $14k for long term) from 2022. My over all income was positive and I had capital loss carryover of $18k for next year- 2023. 

I was unemployed in year 2023 because I moved out of USA to home country and couldn't find a job and couldn't get any unemployment benefit either. But I received dividend ($1561) in 2023 from investment account in USA. Now, when I'm doing taxes for year 2023, My total income came out negative due to capital loss carryover from previous year. This is so frustrating that IRS uses full $3k limit from previous loss carryover even if income/AGI is so low or negative. My status for year 2023 is non resident alien.  I have three questions. 

1. Can I just skip filing taxes this year and carry all previous capital losses to year 2024? I barely made any money ($1.56k) in year 2023.  Or Could I just file tax this year without using capital loss carryover? 

2. Can my negative income be carried for next year or could it provide me any benefit for next year during filing as I plan to work this year?

3. If I do file tax this year, Will my capital loss carryover for next year be $15k ($18k-$3k=$15k)? or more like $18k?  

[ThomasM125 · Accepted solution]

In your case you don't need to use any of your capital loss carryover amount to reduce otherwise taxable income to an amount where any of it is not taxable, so you will be able to carryforward the unused loss to next year. You would need to file a tax return in 2023 to show how the loss carryover is unaffected by your current year income.

Since your negative income is not caused by business losses, you cannot generate a net operating loss which would be the only way you could carry forward a non-capital loss. So, your losses in 2023 cannot be deducted in 2024.

Based on the facts you enumerated here, your capital loss carryforward would be the same amount in 2024 as it was for 2023.

[tomar-gautam2]

Actually, capital loss carry over was already there, saved in Turbotax as I filed taxes with them last year. Because I had $600 capital gain in 2023, my capital loss carryover for this year is reduced by this number. from $18k, it became $17.4k. I can understand this. 

I see what you said for negative income. got it. 

Actually, $3000 deductible from carry over loss is applied on my income (1560) for 2023 and brought it to -$1440. Taxbal income is obviously 0. Now, I'm afraid that my capital loss carryover for 2024 would be reduced by 3000. I don't know if I should just skip adding capital loss carryover and add it next year.  or If there is any other way I could get rid off this $3000 deductible from capital loss carryover? 

[DaveF1006]

No, your carryover should be reduced by $1560. The $1440 amount should be retained in the carryover for next year since you were not able to utilize it. 

I am unaware how you can get rid of the loss carryover provision other than earned a substantial  of capital gains income and then let it completely absorb the entire carryover amount. Other than this, I am not sure why you even would want to get rid of this if you expect to earn capital gains in the future. Perhaps, I am misinterpreting your question.

[tomar-gautam2]

I see. I'll have to check that again. 

What I meant is getting rid of $3000 deductible from capital loss carry over for this year as my income is too low. I wouldn't mind using it in future for capital gain. 

[DaveF1006 · Accepted solution]

Capital loss carryovers last indefinitely if not used. They are there to be used to offset any future capital gains until they are used up.

[tomar-gautam2]

Does anybody happen to know if a non resident alien can use capital loss carryover from previous year? I filed my taxes as a resident last year and I had huge losses in stocks. I have capital loss carryover left. I'm filing my taxes as a non resident alien this year and I want to use capital loss from previous year. 

[AmyC]

You will want to use Sprintax. They have a full customer support team to help you.

@tomar-gautam2  

[torobert222]

How do I edit the amount of capital loss that to use in TT? It automatically deducts the max it can, but now my $2000  dependent deduction is reduced to about $1500. I'd rather use the entire dependent deduction and less of the capital loss.

[DaveF1006]

This cannot be done. In TurboTax, the software automatically applies the maximum allowable capital loss deduction, which can sometimes affect other credits like your Child Tax Credit. Unfortunately, TurboTax doesn't allow you to manually adjust the amount of capital loss used in a given year, as it's determined by tax laws.  

@torobert222