What this line means
The long-term capital loss you are carrying forward from last year’s return. If your total capital losses last year exceeded your total capital gains plus the $3,000 annual deduction limit, the excess long-term loss carries forward to this year. Enter it as a negative number in parentheses. Long-term loss carryovers retain their long-term character.
Does this apply to you?
- You had net capital losses exceeding $3,000 last year and the carryover was classified as long-term
- You completed the Capital Loss Carryover Worksheet in last year’s Schedule D instructions
- You had a large investment loss in a prior year that you have been deducting $3,000 per year against ordinary income
Easy to overlook
Loss carryovers never expire Unlike some other tax attributes, capital loss carryovers carry forward indefinitely until fully used. If you had a $50,000 loss in 2020 and deduct $3,000 per year, you still have carryover available in 2035 and beyond. There is no expiration date. 1 IRS Schedule D instructions — Line 13
Carryovers die with you (mostly) Capital loss carryovers do not transfer to a surviving spouse or heirs. If a taxpayer dies with $100,000 in unused carryovers, those losses disappear. On a final return, the full carryover can be used, but only the decedent’s carryover — a surviving spouse filing jointly can use the decedent’s carryover only on the final joint return. 2 IRS Capital Loss Carryover Worksheet
Watch out for this
Losing track of the carryover amount when switching tax software or preparers. The Capital Loss Carryover Worksheet on last year’s return is the only place this number lives. If your new preparer does not ask for it, or your new software does not import it, you forfeit legitimate losses. Always provide your prior-year return to a new preparer.
Footnotes
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IRS Schedule D (Form 1040) Instructions, Line 13. https://www.irs.gov/instructions/i1040sd ↩
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IRS Schedule D (Form 1040) Instructions, Capital Loss Carryover Worksheet. https://www.irs.gov/instructions/i1040sd ↩