Yes, A tax loss carryforward allows taxpayers to use a taxable loss in a current period and apply against a gain in the current and/or future tax period.
The use of a loss carryforward involves the following steps.
First, short-term loss carryforwards are netted against the current year’s short-term gains and losses, and long-term loss carryforwards are netted against the current year’s long-term gains and losses. If at that point there are no losses left, then the process stops there, and the net long-term gains are taxed at the capital gains rate and the net short-term gains are taxed at ordinary rates.
Second, if there are losses leftover in either or both categories, then both types of gains and losses are combined, and an overall gain or loss is calculated. During this process, there is no distinction between short-term and long-term loss carryforwards.
Third, if the taxpayer is left with an overall loss of more than $3,000, the amount of loss in excess of $3,000 is re-segregated into either short-term and/or long-term losses and carried forward to the next year accordingly.
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