Capital Loss Carryover

[syoung123]

Hello, my wife inherited a brokerage account from her mother in late 2019.  In 2020, the brokerage account incurred about $11,000 capital loss in sales of stocks/bonds.  I am the primary filer and my wife has not filed a return on her own since we were married.  Between the two of us, we had about $6,000 long term capital gains from mutual funds in other accounts.  When I do the married filing jointly using the TurboTax software, I find that we have a net capital loss of $5,000 ($11,000 loss from stock sale in her brokerage account and $6,000 capital gains from our mutual funds).  Schedule D line 21 shows allowable loss (?) of $3,000.  So I figure $2,000 ($5,000-$3,000) would be carried over to 2021?  If my wife and I decide to do married filing separately for 2021, the next tax year, will she be able to claim the $2,000 carried over loss in her own 2021 return since we have been doing married filing jointly since were married, and the capital loss in the 2020 return is calculated based on of married filing jointly status?  Also, how would it work in the TurboTax software since I have been the primary filer with her as spouse?      

[MaryK4 · Accepted solution]

Yes, If the taxpayer and spouse once filed a 2020 joint return and are filing separate returns for 2021, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss.

In TurboTax next year you will have to create a separate new account (User ID) for your spouse for the separate tax return and will be able to manually enter the carryover loss.  You can use the current account (User ID)next year and change the filing status, and just be sure to check that you do not get the loss carryover (it should be automatic based on the entries this year).

[fanfare · Accepted solution]

why would you file MFS ?

In any case her losses follow her tax return,

but what about the $6000 profit from "our mutual funds"

How this is allocated and tracked is a fuzzy area, if you ask me.