I understand I can take $3,000 worth of carried forward capital losses against ordinary income, but do I have to?
TaxCut just does it without asking, so I presume it is required, but TaxCut could be wrong. Thanks.
TaxCut seems to be right.
If you have a capital loss carryover, you must fill out the capital loss carryover worksheet and carry over the calculated amount to your schedule D, where it will reduce your capital gains/loss up to a maximum of 3000. But if your income is very low, even though it might appear to reduce your carryover and use up some of your carryover loss, it might not. That's where the worksheet comes in.
Curious, but just why would you not want take a deduction of $3,000 against other income? It would lower your tax, you know.
ChEAr$, Harlan Lunsford, EA n LA
You do not have any discretion under the law not to take them. There is no election here.
Just as there's no election that allows you to ignore income (unless specifically exempted by statute).
I have way more deductions already to lower my income to zero; this is completely wasted. It would be nice to save it for a year in which I could use it. Should there ever be such a year...
Follow the capital loss carryover worksheet mentioned by Art.
An example:
Suppose on last year's return you had a net long term loss of 5k. And suppose for last year your AGI was 20k, and your itemized deductions were 27k.
Your capital loss carryover is the full 5k, not 2k.
Now suppose your AGI is 26k.
line1=-1000 (income after itemized deduction, but before exemption) line3=line1-line2=-1000 line4000 (loss as a positive number) line5=line3+line4=+2000 line6=+2000 (smaller of line4, line5) line11P00 (long term loss as a positive number) line12=0 (short term gain) line13 00 (line6-line7, but not less than zero) line14=line12+line13 00 line15=line11-line14000
The capital loss carryover is 3k, as if only 2k were used up in the previous year.
You don't lose it. Look at the carryforward worksheet.
You should also check if you have a net operating loss.
You're right! With a negative income it doesn't subtract the $3,000. I feel $600 richer.
You see now? The government will take care of you.
ChEAr$, Harlan Lunsford, EA n LA
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