Question

Can I use Capital Loss Carryover to reduce current year ST Capital Gains?

Forum|Forum|4 years ago
March 12, 2022
1 reply
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My Situation:

50K Capital loss carryover from last year

20K ST Capital gains current year

Can I use the carryover against the ST CGs? Or just LT CGs? The carryover loss is from a LT investment

Not A Product Question

ColeenD3

Yes, but there are limits.

Can I deduct my capital losses?

Yes, but there are limits. Losses on your investments are first used to offset capital gains of the same type. So, short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. Net losses of either type can then be deducted against the other kind of gain.

For example,

If you have $2,000 of short-term loss and only $1,000 of short-term gain, the net $1,000 short-term loss can be deducted against your net long-term gain (assuming you have one).
If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income.
Any excess net capital loss can be carried over to subsequent years to be deducted against capital gains and against up to $3,000 of other kinds of income.
If you use married filing separate filing status, however, the annual net capital loss deduction limit is only $1,500.

ST gains

E

Ep0509Author

Thanks for your response. Could you look at this example?

2020: 10K Capital loss carryover

2021: 8K net ST Capital gain + 8K net LT Capital gain

Can the 10K carryover be used against the ST Capital gain first to avoid paying taxes on it at my ordinary income rate? Or must I use against the LT Capital gain first?

P

PattiF

No, the loss must be applied to the Long Term Capital gain first.

From the TaxBook: "When a taxpayer carries over a loss, the loss remains long term or short term. A long-term loss carried over to the next tax year will reduce that year's long-term capital gains before it reduces that year's short-term capital gains."

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