Suppose I have a large loss after selling a position, for instance $50,000. Does the brokerage automatically keep track of this loss amount over many years when tax loss harvesting $3K per year with Turbo Tax online?
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No. Brokerages and other financial institutions do not keep track of unused capital loss carryover. That's your responsibility. Turbotax keeps track but must be used every year. if you switch to or from Turbotax you must enter your remaining NOL carryforward. This is something the IRS would like check when processing your return.
If you have a net loss for the year (after you subtract the losses from your gains) you can deduct up to 3,000 (1,500 MFS) per year. The rest of the loss you have to carry over each year until it is used up. You can't skip a year. If you use Turbo Tax it will automatically carry over the loss for you.
You get to first offset the loss against any gains you have each year so that can use more of it up. Then after applying the loss to the current gains if there is still a loss, you can take a max loss of 3,000 per year.
If you use Turbo Tax next year the Capital Loss Carryover will transfer over. Or you will have to manually enter the amount.
Schedule D doesn't actually show the carryover amount. To find your Capital Loss Carryover amount you need to look at your return schedule D page 2. Line 16 will be your total loss and line 21 should be a max loss of 3,000. The difference between line 16 and 21 is the carryover loss.
If you used the desktop version or have the complete pdf of your last year's return you might have the Capital Loss CO (carryover) worksheet that will tell you the amount.
In the Online version you have to save your return with all the worksheet as a pdf file to your computer to see the Capital Loss carry over worksheet. There might be 2. There is a Capital Loss Carryover Worksheet showing the carryover from the prior year and the current amounts. Then there is also the Capital Loss Carry Forward worksheet showing the amount transferring over to next year.
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