Can I claim capital losses against my ordinary income? If so, how?

[s0und]

I incurred capital losses in the last year but turbotax is carrying them over to the next year instead of counting them against my ordinary income

[VolvoGirl]

Yes but only up to a 3,000 loss.  If you have investment sale losses, after you subtract the losses from your gains you can only deduct up to 3,000 per year. You can only deduct up to 3,000 (1,500 MFS) loss per year after any gains you have. The rest you will have to carryover until it is used up.

[Hal_Al]

Yes, but you are limited to $3000 per year. Any additional can be carried forward to next year and future years until used up at the rate of $3000 per year. Each year capital losses are first used to reduce capital gains before being deducted against ordinary income. Example: you lost $20,000 on stocks in 2020. You may deduct $3000 for 2020 and carry a $17,000 loss forward to 2021. In 2021, you make $5000 in the stock market; 17,000-5000= $12,000 loss for 2021, you may deduct $3000 for 2021 and carry $9000 forward to 2022.

[s0und]

It seems the answer to my question is yes, but my real question is "why isn't the turbotax softwarw letting me claim my capital losses against my ordinary income? How can I resolve that issue?

[VolvoGirl]

Did you enter sales?  You should have a max 3,000 loss on 1040 line 7.  It is subtracted from your other income.  WhAt are you seeing?

[s0und]

I am seeing the capital loss being carried over into 2021 instead of being used in 2020. Not sure why this might be but I can't figure out how to use the capital losses. The same thing happened in my 2019 return where it was deferred instead of being used against other income.

[VolvoGirl]

Where are you looking?  Do you have a negative AGI?

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.

[s0und]

Looking at my tax summary it says I still have positive AGI. I am making under 10k a year and taking the standard deduction so would that affect the amount of capital losses I can use? As it is I will only owe medicare and social security taxes on my income

[Hal_Al]

 Q. >I am making under 10k a year and taking the standard deduction so would that affect the amount of capital losses I can use? 

A. > Yes.  Since your standard deduction already reduces your taxable income to zero, none of your capital loss is used on this year's return.  The entire loss carries forward to next year.  Your capital loss cannot help you reduce self employment tax ( medicare and social security taxes).