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Capital Loss Carryover Worksheet

This page is the Capital Loss Carryover Worksheet from the Schedule D instructions, made fillable. Type last year's five figures — the taxable income line, the allowed loss, and the four short- and long-term totals the worksheet reads — and it runs all thirteen lines in the order the paper runs them, printing each result next to its official line number so you can lay the completed sheet beside the paper and check it row by row. The short-term and long-term carryovers come out on separate lines, exactly as the worksheet puts them on separate lines. The finished sheet downloads or prints for your records, because the worksheet is kept, never filed.

Last year's figures

Taxable income, prior-year Form 1040, line 15 — a loss there goes in parentheses, e.g. (3500) Worksheet line 1. If filling this line out as a loss would have shown a negative amount, the paper asks for the figure in parentheses — this box takes it that way, or with a minus sign.
Allowed loss, prior-year Schedule D, line 21 — as a positive amount Worksheet line 2. This is the loss the prior year was actually allowed — at most 3,000.00, or 1,500.00 married filing separately. If last year's line 21 was not a loss, there is no carryover to work out; leave this at 0 and the page says so.
Short-term loss, prior-year Schedule D, line 7 — as a positive amount Worksheet line 5, filled only when last year's line 7 was a loss. If line 7 was a gain or zero, leave this at 0 — the paper sends you straight to line 9.
Long-term gain, prior-year Schedule D, line 15 — if it was a loss, leave 0 Worksheet line 6.
Long-term loss, prior-year Schedule D, line 15 — as a positive amount Worksheet line 9, filled only when last year's line 15 was a loss. If line 15 was a gain or zero, leave this at 0 — the paper skips lines 9 through 13 entirely.
Short-term gain, prior-year Schedule D, line 7 — if it was a loss, leave 0 Worksheet line 10.
Short-term capital loss carryover — worksheet line 8, goes on Schedule D line 6 —
Long-term capital loss carryover — worksheet line 13, goes on Schedule D line 14 —

Type last year's five figures: the taxable income from Form 1040 line 15, the allowed loss from Schedule D line 21, and the four short- and long-term totals.

Capital Loss Carryover: The Part of a Bad Year That Follows You

A capital loss carryover is what survives when your losses outrun what the tax code lets you use in one year. The mechanics take two sentences. Losses cancel gains first. Then up to $3,000 of whatever loss remains comes straight off ordinary income — $1,500 if you file married-separately — and every dollar still standing after that rolls into next year, keeping its short-term or long-term label, with no expiration date. Congress wrote the ceiling itself: 26 U.S.C. §1211(b) allows a noncorporate taxpayer's capital losses "only to the extent of the gains," plus the lower of $3,000 ($1,500 married filing separately) or the excess of losses over gains. Everything else about the rule is paperwork — and the paperwork is where people lose money.

The carryover does not live on your return

Nobody files it. The Capital Loss Carryover Worksheet — buried in the Schedule D instructions and Publication 550 — does the arithmetic, and the finished worksheet stays in your own records, not with the return. Schedule D pulls last year's answer onto line 6 (short-term) and line 14 (long-term); line 21 reports the amount this year allowed you. If the IRS ever questions a year's figures, that kept worksheet is the only thing standing between you and a recalculation you can't document.

The number that travels backwards

Some widely-read explanations hand the $3,000 to married couples and the $1,500 to single filers. The statute says the opposite: the $1,500 concession belongs only to married-separate filers, and everyone else — single, joint, head of household — works with the full $3,000. Misreading this costs small amounts annually, but it signals how carelessly this topic gets recycled.

The recycling shows up in line numbers too. Evergreen articles still send you to Form 1040, line 13. The current form takes the figure on line 7 — or line 7b, checked, when Schedule D doesn't apply. A five-year-old checklist is already pointing at the wrong box.

The $3,000 is not a blend

Here the explanations that look complete go quiet. The worksheet runs your short-term loss against the limit first; only after the short-term bucket is exhausted does the long-term remainder touch the $3,000. So the amount you deduct against salary is rarely a mix of the two characters — and because the leftover buckets carry their labels forward and price differently against future gains, which bucket the $3,000 consumed matters long after the deduction itself is forgotten.

What trips people who think they have this handled

The three-year fuse. Miss a carryover you were owed and the fix has a deadline: 26 U.S.C. §6511(a) gives you a claim for the overpayment within 3 years of filing the return or 2 years from paying the tax, whichever ends later. Let that window close and the loss is not deferred. It is gone.

The rollover that stops rolling. Tax software imports a carryover automatically only if it prepared last year's return too. Switch products, or switch from a paid preparer to your own filing, and the import is gone — the carryover screen then asks for the same inputs the worksheet uses: prior-year taxable income from Form 1040 line 15, Schedule D lines 7 and 15, the allowed loss from line 21, and AMT income. Practitioners who do this daily name unentered carryovers among the most common misses they see, from self-preparers and paid preparers alike.

A second column you may not know exists. The worksheet carries AMT figures alongside the regular ones, and the two numbers can differ. If you were ever subject to AMT, don't assume the regular-tax carryover is the only one.

A carryover that belongs to your spouse. Couples who filed jointly in the loss year and separately later can't split the old carryover between them: the joint-year carryover is deductible only by the spouse who actually incurred the loss. And a cancelled-debt exclusion in the current year changes the worksheet's inputs entirely — Publication 4681 governs that branch.

Losses that never enter the pipeline at all

Sell your car, your couch, or an old phone for less than you paid: no carryover, no deduction, nothing. Section 165(c) limits an individual's deductible losses to those from a trade or business, from a transaction entered into for profit, and from casualty or theft. Personal-use property is in none of those buckets, no matter how loudly the resale listing proves the loss.

Before you file

Pull last year's worksheet before touching this year's software, and check three things: that lines 6 and 14 of Schedule D already show the carryover, that the carryover screen's five inputs match your records, and that the short-term figure went against the $3,000 first. Ten minutes with a kept worksheet settles what a whole April of guesswork gets wrong.

This page is a worksheet, not tax advice. The arithmetic is the Capital Loss Carryover Worksheet from the current Instructions for Schedule D (Form 1040), transcribed line for line. Contact: contact@stockavg.com