The Money Mustache Community
Learning, Sharing, and Teaching => Taxes => Topic started by: jeromedawg on March 20, 2017, 08:16:50 PM
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Hey all,
So last year when filing taxes (via Taxact) I had well in excess of $3000 for capital loss carryovers from 2015. For some reason, the remaining carryover amount of $3456 was pre-filled into the capital loss carryover section - this doesn't seem right given that $3000 is the capital loss carryover max per year no? I'm not sure why Taxact pre-filled with an amount greater than $3000 but I'm assuming I should probably change it to $3000?
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Your assumption is mistaken.
Any amount of capital loss can be carried forward.
The $3000 limit is the amount of capital loss in excess of any capital gains that can be used to offset ordinary income.
So if you had gains of $5,000, losses of $10,000, you could offset $3K of ordinary income in year N and would have a $2K carryover to year N+1. If you had gains of $5K and losses of $20K, you could offset $3K of ordinary income in year N and would have a $12K carryover to year N+1.
In general, Taxact seems to get most mainstream scenarios correct.
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Agreeing with secondcor521, but putting it differently:
You have $3456 of capital loss carryover. If nothing else happens, you will subtract $3000 from your taxable income and be left with $456 for next year. More likely, you have some kind of capital gains.. maybe $1000. Then that first $1000 of gains meets $1000 of capital losses and both cancel out. You would then be left with $2456 of capital loss to apply to the current year.
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Thanks all for the clarification! Was beginning to think the $3000 was an "offset" limit - makes sense now