Timeline for Can capital loss be applied for tax for non-consecutive years?
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| Jun 11, 2012 at 13:01 | comment | added | JTP - Apologise to Monica♦ | I am not correct in one of my comments above. Income of the exact std deduction amount ($5800 in 2011) will not affect carrry-forward loss. But, if income is offset by your exemption ($3700 in '11) the $3000 can be partially or fully lost. I produced a test return on TurboTax. A $5800 gross income shows whatever loss was carried from '10 passing through, the worksheet adding it back in, even though prior calculations "try" to use it up. | |
| Jun 11, 2012 at 2:45 | vote | accept | Tim | ||
| Jun 11, 2012 at 0:23 | comment | added | littleadv | @Tim that is correct. | |
| Jun 10, 2012 at 23:44 | comment | added | Tim | @JoeTaxpayer: Thanks! In Form 1040, the capital loss is applied on line 13 with Schedule D, which is before adjustment, deduction and exemption can apply. So even when the wage is so low that it would be completely offset by adjustment, deduction or exemption if there were no capital loss, the capital loss still has to be applied first before adjustment, deduction or exemption, which leave no chance to save the loss for future years? | |
| Jun 10, 2012 at 14:52 | comment | added | Tim | @JoeTaxpayer: Thanks! By "Required. But it doesn't get 'used' if your taxable income is zero", do you mean applying capital loss is a must although a waste, or no waste here, i.e. will leftover loss be reduced? I notice that capital gain and loss are reported on schedule D, and considered before calculating taxable income in Form 1040. | |
| Jun 10, 2012 at 14:38 | comment | added | JTP - Apologise to Monica♦ | Required. But it doesn't get "used" if your taxable income is zero. Yes, it will be used on 10% income, the first bracket. | |
| Jun 10, 2012 at 11:31 | comment | added | Tim | @JoeTaxpayer: Thanks! As littleadv said, whenever there is capital gain, capital loss must be used to offset it, otherwise the entire capital loss will expire. I wonder if $3000 loss per year that can be used to offset ordinary income after offsetting capital gain is optional or required? I hope to save the loss for some future years when I have more ordinary income such that my tax is non-zero, whereas my current ordinary income is too low and my tax is zero. | |
| Jun 10, 2012 at 4:32 | comment | added | littleadv | @JoeTaxpayer you're right, forgot to mention that. | |
| Jun 10, 2012 at 4:32 | history | edited | littleadv | CC BY-SA 3.0 |
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| Jun 10, 2012 at 4:18 | comment | added | JTP - Apologise to Monica♦ | @littleadv - losses first apply to gains, but then $3000 per year can be used to offset ordinary income. The rest of your answer is correct. | |
| Jun 10, 2012 at 3:05 | comment | added | littleadv | @Tim, I mean that if you have a capital gain, and you have a carry-forward capital loss from a prior year - you must use it, or lose it. What happens to your tax liability is irrelevant. You don't have to apply it, if you don't want to, but you won't be able to carry it further forward without applying it. | |
| Jun 10, 2012 at 3:04 | comment | added | Tim | So you mean that if there is positive capital gain in year X+1, the left-over capital loss in year X must be used to offset the gain in year X+1, no matter the loss help to reduce the tax or not (for example, the tax is already zero because the income is too low)? | |
| Jun 10, 2012 at 3:00 | comment | added | littleadv | @Tim did I mention the tax liability anywhere? I didn't. What made you think it has any bearing? Its irrelevant. | |
| Jun 10, 2012 at 2:55 | comment | added | Tim | Thanks! "You cannot have capital loss in year X, capital gain in the year X+1, and then offset the capital gain in the year X+2 with the losses carried forward from the year X. You must offset the gains of the year X+1." Does it mean that even when the tax for the year X+1 is zero because of low income only, must the loss in year X still be used to offset positive capital gain in year X+1, even though the loss doesn't help to reduce any tax? | |
| Jun 10, 2012 at 2:06 | history | answered | littleadv | CC BY-SA 3.0 |