Recouping prior year Long Term capital gains against current year Long Term capital loss.

[Saving CG Tax]

We expect $200,000 in Long Term capital gains for 2023.

We also expect $50,000 Long Term capital loss in 2024.

Taxable income for both years is approximately the same.

Assume the laws don't change for 2024.

Can we recoup captial gains tax paid on 2023 return when we file our 2024 taxes?

Will we have to do an amended return for 2023 or will turbotax programming address this?

[rjs]

There is no way to offset the 2024 capital loss against the 2023 capital gain. It's not a question of TurboTax handling it. The tax law does not allow it.

You didn't say what the gain and loss come from. If you have any flexibility in making the transactions, you could try to either take the loss in 2023 or delay at least part of the gain to 2024.

[Mike9241]

@Saving CG Tax There is an exception to the no capital loss carryback rule and that's losses from regulated futures contracts (section 1256). 1256 gains and losses are reported on form 6781. the carryback is actually 3 years but if no 1256 income in the 3rd or 2nd prior year the c/b would go against 1256 net gains in the prior year.

[Saving CG Tax]

The capital gains are on the sale of a long term rental house.  The loss will be the result of another long term rental house.

We are retired and our taxable income averages $60,000.  Does the $200,000 capital gain get counted as earned income in determining the tax bracket for capital gains which would result in $260,000 earned income?

[rjs]

"Earned" income has nothing to do with capital gains or your tax bracket. Earned income is income from working.

The capital gain is included in your total income and your taxable income. The tax bracket that applies to long-term capital gain is based on your total taxable income, including the capital gain.

Taxable income is total income minus adjustments and either itemized deductions or the standard deduction. Taxable income is on Form 1040 line 15. You have not given enough information to calculate your taxable income. You can use TaxCaster to get an estimate of your taxable income and your tax.

[Opus 17]

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@Saving CG Tax wrote:

The capital gains are on the sale of a long term rental house.  The loss will be the result of another long term rental house.

We are retired and our taxable income averages $60,000.  Does the $200,000 capital gain get counted as earned income in determining the tax bracket for capital gains which would result in $260,000 earned income?

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Yes, the gains count as income for determining the tax rate.  This is how it works.  (This is simplified and the numbers are approximate).

Let's assume that by  $60,000 of "taxable income" you mean your income after your standard deduction.  For married filing jointly, that places you in the 12% income tax bracket and zero percent capital gains tax bracket.  The 22% income tax bracket (and the 15% long term cap gains bracket) starts at $89,500.  That means that the first $29,500 of the long term gain will be taxed at zero percent, and the remaining $170,000 will be taxed at 15%.

If you could delay the sale of the first house, or accelerate the sale of the second house, into the same tax year, then the loss would offset the gain.  If not, the $50,000 loss in 2024 can be used to offset any additional gains from 2024, plus $3000, and you can continued to deduct $3000 per year going forward until you use up the loss.