Can a small capital loss (in 2020) be used next year (2021) instead of on this year's taxes return (2020)?

[Questionasker]

For 2020 I have a capital loss of $433. (There were no capital gains, only that loss from the sale of an ETF.) Can that $433 be carried over to 2021 to offset capital gains that will be on the 2021 return? Right now I think I have finished my 2020 return and it looks like TurboTax is applying the capital loss to my income for 2020. However I am not even using up all of my standard deduction this year, since income is so low. Therefore I think it would be more beneficial to use the capital loss on the 2021 return, if that can be done, rather than on the 2020 return, since it would then help offset capital gains that will be there for 2021.  For 2020 I will pay 0 taxes whether or not the capital loss is deducted from income.

[rjs · Accepted solution]

You have no choice about when you use a capital loss. The rules for applying losses are set by the tax laws. The only time that capital losses get carried over to the following year is when the capital losses exceed your capital gains in the current year by more than $3,000.

[macuser_22]

And if you do not apply it to the current year, you loose any carry forward amount, because it can only be carried forward from the *previous* year - not 2 years ago.

[Questionasker]

One further question about capital loss.  It looks like, as noted above, -$433 is shown on line 7 on 1040-SR as a capital loss.  However I also see that on the TurboTax sheet that says "Capital Loss Carryforward Worksheet, 2021, Capital Loss Carryforward from 2020 to 2021, > Keep for your records" it shows line 13 "Long-term capital loss carryforward to 2021." as $417.   (in 2020 there was a short term capital loss of $16, and long term capital loss of $417)   Does this sheet indicate there will also be some type of benefit on my 2021 tax return for the capital loss in 2020? 

Or is that worksheet for some other purpose? 

(In other words, previous question and answer indicated that if capital loss didn't exceed $3000 this year, nothing could be carried forward to next year, but this worksheet's last line item shows an amount, $417, for a "Long-term capital loss carryforward to 2021.)

[macuser_22]

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@Questionasker wrote:

One further question about capital loss.  It looks like, as noted above, -$433 is shown on line 7 on 1040-SR as a capital loss.  However I also see that on the TurboTax sheet that says "Capital Loss Carryforward Worksheet, 2021, Capital Loss Carryforward from 2020 to 2021, > Keep for your records" it shows line 13 "Long-term capital loss carryforward to 2021." as $417.   (in 2020 there was a short term capital loss of $16, and long term capital loss of $417)   Does this sheet indicate there will also be some type of benefit on my 2021 tax return for the capital loss in 2020? 

Or is that worksheet for some other purpose? 

(In other words, previous question and answer indicated that if capital loss didn't exceed $3000 this year, nothing could be carried forward to next year, but this worksheet's last line item shows an amount, $417, for a "Long-term capital loss carryforward to 2021.)

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That is assuming you have enough taxable income after deductions to use all for the $3,000.      Short term loss does not carry forward, only long term loss does. 

See the calculations on  the "Capital loss carry forward worksheet."

[VolvoGirl]

I didn't see anyone mention it....but since your income is low and less than the Standard Deduction,

if you have a negative AGI or negative taxable income it will show up on 1040  BUT it won't reduce the carryover to the next year.

[Questionasker]

Regarding looking at the calculations on the "Capital loss carry forward worksheet." I wonder if TurboTax is handling that correctly. In other words, line 1 of "Captial Loss Carryforward Worksheet" says Enter the amount from 2020 Form 1040, line 15. If a loss enter as a negative amount." My 1040-SR line 15 is 0. However the "Captial Loss Carryforward Worksheet" line 1 shows as -6,783, not as 0. If calculated based on 0, then the bottom line on that worksheet, "Long-term capital loss caryforward to 2021." would be 0.

The main thing I would like to be clear about is if I had only a $417 long term capital loss for 2020, is there any benefit from that for 2021? In other words does that purely affect 2020 return only?

[Questionasker]

Thank you for the thought.  However I do have a positive AGI, $19,317.  Taxable income is $0.

[macuser_22]

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@Questionasker wrote:

Regarding looking at the calculations on the "Capital loss carry forward worksheet." I wonder if TurboTax is handling that correctly. In other words, line 1 of "Captial Loss Carryforward Worksheet" says Enter the amount from 2020 Form 1040, line 15. If a loss enter as a negative amount." My 1040-SR line 15 is 0. However the "Captial Loss Carryforward Worksheet" line 1 shows as -6,783, not as 0. If calculated based on 0, then the bottom line on that worksheet, "Long-term capital loss caryforward to 2021." would be 0.

The main thing I would like to be clear about is if I had only a $417 long term capital loss for 2020, is there any benefit from that for 2021? In other words does that purely affect 2020 return only?

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The wording is confusing.  What it means the 1040 line 15 cannot be less than zero but it can be a loss that is used for carry over.

The 1040 line 15 is line 11 minus line line 14 which can be a negative number that goes on the Carry forward Worksheet  line 1 for carry over purposes, but the 1040 form cannot be less than zero.

[Questionasker]

macuser_22, thank you for clarifying the wording and what it really means on that instruction. Maybe I need to study the tax rules in more detail to understand this, but here is what I am still unclear about: On the one hand, based on seeing $417 on line 13 of of the Capital Loss Carryover Worksheet seems to indicate the $417 long term capital loss could be carried over to 2021, however on the other hand if I understand correctly from first answer to my question, since it did not exceed a $3000 loss it cannot be carried over. What am I missing in my understanding? Should that $417 loss carry forward or not?

("The only time that capital losses get carried over to the following year is when the capital losses exceed your capital gains in the current year by more than $3,000.")