Capital Loss Carryover

A capital loss carryover is a loss on the sale of an investment that can be used to offset capital gains in future years. Capital losses can be carried back for three years and forward for five years. This means that you can use a capital loss from 2023 to offset capital gains from 2020, 2021, 2022, 2024, 2025, or 2026.

There are a few things to keep in mind when using a capital loss carryover. First, you can only use it to offset capital gains. You cannot use it to offset ordinary income, such as wages or salaries. Second, you can only use it to offset up to $3,000 of capital gains in a given year. Any remaining capital loss carryover can be carried forward to future years.

Third, you must report your capital loss carryover on your tax return. You can do this by filing Form 8949, which is used to report capital gains and losses. On Form 8949, you will need to report the amount of your capital loss carryover and the year in which it occurred.

Finally, you should keep track of your capital loss carryovers. You can do this by keeping a copy of your tax returns for the years in which you had capital losses. You can also use the IRS's Capital Loss Carryover Calculator to help you track your capital loss carryovers.

Using a capital loss carryover can be a great way to reduce your taxes. However, it is important to understand the rules and limitations before you do so. If you have any questions, you should consult with a tax professional.