Submitted by nsharma2 t3_127rqkk in personalfinance
DrRobertBottle t1_jefm76x wrote
Looks like someone point you in the right direction on how to report the lost.
As a side note, you can report a max of $3k total loss per year. However, if you have capital gains, your carryover capital loss is used against that.
Concrete example:
Tax year 2022, You take the $20k loss. You had no capital gains. You'll have a $3k capital loss with a $17k carryover capital loss.
Let's say in tax year 2023, you have $5k capital gains from sell stocks. So, you'll use $5k of your carryover for that and then you'll use another $3k as a capital loss. On your taxes, you'll have a -$3k capital gains and a ($17k-$5k-$3k) $9k carryover loss.
Let's say in tax year 2024, you don't have any capital gains so you take a $3k capital loss using the carryover loss. Now your carryover is $6k.
Let's say in tax year 2025, you have $10k capital gains from selling stock. You will use all of your carryover capital loss and report a capital gain of $4k.
Your tax software will do this automatically for you. I've had a large capital loss carryover and the next year I realized a bunch a capital gains to wipe out my carryover. I look at that carryover as giving free money to the IRS that I want back ASAP.
nsharma2 OP t1_jefrmk4 wrote
Thats great to know! Hopefully my software remembers and takes care of all this for me, because I sure won't remember :-)
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