Net Investment Income Tax

[shg]

If I have $300,000 of  capital carry over losses from stocks, in addition to the $3,000 that I can deduct each year can I offset Investment Income against some of these carryforward losses- is there a limit?

[KarriC]

Good news! NO, there is NOT a limit on your capital loss carryforward's use.

TurboTax keeps track of the carryforward and maximizes its use! It will automatically use any loss carryforward against any gains you have (including factoring in any losses you have in the current year), then it will add on that additional $3,000 loss. Very nifty.

Here's an example how it works:

Capital loss carryforward from 2023 = ($503,000)

Capital gains in 2024 = $400,000

Capital loss carryforward used to offset cap gains in current year = ($400,000)

Maximizing capital loss (we can claim no more than $3,000 ea year) = ($3,000)

Capital loss carryforward from 2024 = ($100,000)

[shg]

Does this $100,000 loss carryforward get applied against NIIT so as to reduce or eliminate the 3.8%

[KarriC]

The capital loss will carryforward for NIIT purposes.

[shg]

but question is  can the $100,000 loss carryforward be applied this year against Net Investment Income?

[mmaherTE]

Yes, The capital loss carryovers can be used to offset capital gain net investment income.  Those carryover losses will offset the same type of investment income but will not offset other types of income that may be subject to the net investment income tax. 

Please see the IRS information Questions and Answers about the NIT info at the following link:

https://www.irs.gov/newsroom/questions-and-answers-on-the-net-investment-income-tax  

in particular section 17 which deals with the type of income that can be used to offset NIIT.