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For example if you have (assume no other income):

2022 $600K capital loss carried forward

2023 $300K capital gains

2024 $1.5M capital gains

Do you have safe harbor to pay 0 estimated tax until Jan 2025 without penalty?

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  • You only need to pay the 2024 tax by April 15, 2025.
    – user102008
    Feb 1 at 5:23

1 Answer 1

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The IRS is pretty clear on this:

You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.

  • You had no tax liability for the prior year
  • You were a U.S. citizen or resident alien for the whole year
  • Your prior tax year covered a 12-month period

You had no tax liability for the prior year if your total tax was zero or you didn’t have to file an income tax return.

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  • I have seen that, probably should have included it in my question. What does 'no tax liability' mean? Does the capital gains in 2023 create tax liability or is there no liability because the carryover loss reduces tax owed to zero? Also does taking the carryover loss extend the prior year beyond a 12 month period?
    – rmrmqqq
    Feb 1 at 4:42
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    Tax liability is your total tax owed before withholding and estimated payment
    – littleadv
    Feb 1 at 5:24
  • @rmrmqqq: it works indirectly. Your 2022 cap loss carryforward reduced your 2023 taxable income to $0, thus your 2023 tax is $0. In fact if in 2023 after the carryforward(s) you had net longterm gain up to $44,625 if single ($59,750 HoH, $89,250 MFJ/QSS) plus either your standard deduction or your itemzed deductions and no other income, you still had $0 tax, and thus for 2024 no required estimated payments. Feb 2 at 3:51

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