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atu75
Level 2

Capital loss carryover ?

I had a very small capital loss in 2019 and it was deducted from my income in 2019, which was entirely made of dividends.

Now I am doing my 2020 taxes and again I only have dividend income only but why does the program shows I still have this small capital loss as a carryover to 2020? It was already deducted from my income in 2019 (again my income in 2019 and 2020 are dividend only - if that matters - since I didn't work)

7 Replies
JoannaB2
Expert Alumni

Capital loss carryover ?

It depends.  If the total of your unearned income such as taxable interest, dividends, and capital gains, are more than $1,100 for 2020, you need to file a return even if it's not required by your earned inocme. If you have leftover losses from prior year, it will be carryforward to the current year.

atu75
Level 2

Capital loss carryover ?

my dividend amounts are smaller than what you said but that is not what I am asking

I am asking, that, the small capital loss was deducted from dividend last year.

then why it is carried over to this year and again getting subtracted from my dividend this year also?

For example lets say I had dividend of $100 last year. And a short term capital loss of $10 last year . So then last year it adjusted my income to 90$

 

Now lets say I have 50 $ dividend for 2020. But that $10 still is here and still getting deducted as it carried over to 2020 for 2019. So it makes my income as $40 now. Or it shouldnt? But the program makes it carryover to 2020 . Even in the worksheet of last year I saw this capital loss as carryover to 2020.

 

gloriah5200
Expert Alumni

Capital loss carryover ?

Each year, you are limited to $3000 capital loss carryover amount to be applied to your current year net income, as long as you have $3000 unused capital loss to be carried over to the current year return.

 

If you do not have enough net income on your return to utilize that unused capital loss carryover, then a worksheet is prepared and the unused amount will be carried over to the next year.

 

Per IRS Topic No. 409:

 

Limit on the Deduction and Carryover of Losses

 

If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 21 of Schedule D, Form 1040.

 

If your net capital loss is more than this limit, you can carry the loss forward to later years.

 

Figuring your carryover.

 

The amount of your capital loss carryover is the amount of your total net loss that is more than the lesser of:

  1. Your allowable capital loss deduction for the year, or

  2. Your taxable income increased by your allowable capital loss deduction for the year.

If your deductions are more than your gross income for the tax year, use your negative taxable income in figuring the amount in (2) above.

Complete Worksheet 4-1 to determine the part of your capital loss that you can carry over.

 

Since the 2020 Pub 550 is not yet available, we can use the 2019 pub 550 for additional information on the capital loss carryover worksheet.;

 

 

atu75
Level 2

Capital loss carryover ?

Thanks for a lot of information but my question is still unanswered or I miss something.

 

Why does the capital loss gets used in 2019 to lower my income and then it (the same loss) gets used AGAIN to lower my income in 2020? Is this normal? Why is it used twice? Shouldn't it be used once? This is my question.

 

EDIT: I just check my 2019 worksheet for capital loss carryforward. Although my line 11b on my 1040 was correctly 0, it wrote a negative amount on first line for regular tax on worksheet. Why??? For example lets say my standard deduction was 12200 and my income was, say, $200, then it wrote -12000 to the first line to regular tax column. As minus. This produced a short term carryforward to 2020, in the amount of my 2019 capital loss on line 8 in the regular tax column. But in my 1040 everything looks correct. This worksheet was NOT submitted to IRS right? And now when doing my 2020 tax, I manually overrode the form to produce worksheet where it said for "income before exemptions". I changed the information from 2019 from -12000, to zero. So now the carryover amount is eliminated. But why did it produce it last year on worksheet? Also what is alternate minimum tax? It shows as $200 which I didn't touch. Please answer my questions but I also want to contact support and talk to someone or email where a support person will review. How can I do it? 

 

 

JohnB5677
Expert Alumni

Capital loss carryover ?

I do not know how the situation you described in 2019 happened.  I had not heard of it before, but on to your questions.

 

No, the carryover form was not included in your return, but even if it were you could easily explain why you changed it.

 

Yes, you should have corrected the erroneous carryover.  However, you should not have gone to the forms mode to do it.  This could void our guaranty.

 

To correct Capital Loss Carryover:

  1. Income
  2. Scroll to Investment income
  3. Select Capital loss Carryover
  4. Make your correction.
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atu75
Level 2

Capital loss carryover ?

No I didn't go into forms mode.

 

I cannot see the steps you described but when I go to income tab, I see a capital loss carryover section. I went there. I hit edit. I correct the first line for 1040 line 11b to zero. The rest of three lines that take info from schedule D don't change. So now it produces a zero carryover from 1019 correctly .

 

Then it says "

You probably don't, but we have to ask—do you have different carryover amounts for AMT?

and I mark no. I dont even know what is AMT and why I am dealing with this. I didnt have before, except that erroneous form. So I select "no I dont" anyway.

 

and then it says

One last thing—what was your AMT income?
Take a look at line 4 on your 2019 Form 6251 (Alternative Minimum Tax). If you have a negative number reported on your Form 6251, enter it as a negative number.

Well, I never had form 6251 and I dont know why I should have. My tax situtaion was really simple. Why did it come up ... So then I look at the link that says "what if I do not have form 6251"

And there it says:

 

 

Even without Form 6251, you can determine your alternative minimum taxable income (AMTI) to enter here. Your alternative minimum taxable income (AMTI) may still be different than your "regular" taxable income. For most people, the starting point for determining AMTI is last year’s “regular” taxable income (Form 1040, Line 11b), plus your standard deduction (Form 1040, line 9) on last year’s return. For most people, the amount that you enter here won't change your tax return result. 

Though less common, the following are reasons why some people may need to further adjust their AMTI:

****lists reasons that dont apply to me****

 

So then I look at my last year line 11b which is zero, plus my stanadrd deduction of 12200. And hit continue. Then it brings a screen where it lists summary of capital  loss carryover from 2019 which is zero, capital loss used in 2020 which is zero and capital loss carried to 2021 which is zero, which are all correct. So this means if I pay $70 dollars now and will see my final prepared tax return I will not have to see that error form again and my capital loss will be gone right? And that AMT stuff which I have no idea about will not affect my tax in any way right?

JohnB5677
Expert Alumni

Capital loss carryover ?

An alternative minimum taxable (AMT) was developed to limit wealthy individuals from taking advantage of tax loopholes.

 

It is calculated by taking the ordinary income and disallowing items and credits such as state and local tax deductions, interest on private-activity municipal bonds, the bargain element of incentive stock options, foreign tax credits, and home equity loan interest deductions.

 

This broadens the base of taxable items. Many deductions, such as mortgage home loan interest and charitable deductions, are still allowed under AMT.

 

The Tax Cuts and Jobs Act of 2017 (TCJA) reduced the fraction of taxpayers who owed the AMT from 3% in 2017 to 0.1% in 2018.

 

Now, Yes with everything deleted out you will not have any carryforward Capital Loss in 2021.

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