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What is my capital loss deduction?

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December 17, 2020
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For 2020 I have a $4000 short term capital loss and a $15000 long term capital loss (the long term loss is a carryover from 2019). I have no capital gain. I know that there is a maximum $3000 capital loss deduction. Will this come from the short term or long term capital loss, and what will be my carryover?

Best answer by Anonymous_

In sum, you will have a $1,000 short-term capital loss carryover and a $15,000 long-term capital loss carryover (this presumes you have no other capital losses or gains for the current tax year).

Short-term losses are first used to offset short-term gains while long-term losses are first used to offset long-term gains. If you have no capital gains whatsoever, then short-term losses are used first to offset other income up to $3,000 (i.e., used before long-term losses).

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Anonymous_Answer

Employee

In sum, you will have a $1,000 short-term capital loss carryover and a $15,000 long-term capital loss carryover (this presumes you have no other capital losses or gains for the current tax year).

Short-term losses are first used to offset short-term gains while long-term losses are first used to offset long-term gains. If you have no capital gains whatsoever, then short-term losses are used first to offset other income up to $3,000 (i.e., used before long-term losses).

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starfishtAuthor

Thank you. That was clear and concise.

I have a related question: If I realize some long term gains, do those gains offset my 2019 $15000 carryover? In other words, say that I realize $15000 in long term gains. Will that offset my 2019 carryover, and still leave me with a $1000 short term carryover to 2021 and a $3000 offset to other income in 2020?

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Anonymous_

Employee

@starfisht wrote:

Will that offset my 2019 carryover, and still leave me with a $1000 short term carryover to 2021 and a $3000 offset to other income in 2020?

Yes, that is correct. $3,000 offset to other income in 2020 and a $1,000 carryover to 2021.