I am so confused about the stock capital losses "carry over" when you do your taxes...
You are allowed to "carry over" up to $3000 in capital losses to the next year(s) of your taxes and this loss will affect your "income". But here is where I am confused...
FOR EXAMPLE: TAX FOR PERSON A
Year 1: Normal Job Income ($50,000) /// Final income = $50,000
Year 2: Normal Job Income ($50,000) + (-$3000) Loss from stocks capital losses /// Final income = $47,000
Year 3: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Year 4: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Year 5: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Year 6: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Year 7: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Year 8: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Year 9: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Year 10: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Year 11: Normal Job Income ($50,000) + (-$3000) Capital losses "carry over" from Year 2 /// Final income = $47,000
Because of the "carry over" rule, you can deduct $3000 every year from your income from Year 2 to Year 11.
Where I am confused is that, wouldnt this mean that over the course of 10 years. You have lost ($30,000)($3000x10) on paper? (When in reality you only lost $3000 in year 2)
Also, if you continue this "carry over" for say 30 years in a row, would you have "lost" $90,000 on paper? (And you would have $90000 of tax deductions against your normal job income?)
The reality is that, you only ever lost $3000 in total.
lol.. if you only realize a capital loss of $3000, then you can only ever write off $3000. You don't get to just keep using a single loss every single year thereafter. In this example, PERSON A (written as if there should have been a PERSON B?) loses $3k in year 2. If no further loses happen, he/she can carryover up to that $3k into future years until the $3k is exhausted. They could use it all in one year (be it the next year or some year in the future) or they could use $1k of it one year then the other $2k a different year, etc.
Exhausted by ordinary income? Or can only be exhausted by capital gains?
I think you over did it a little with the copy and paste
"he/she can carryover up to that $3k into future years until the $3k is exhausted."
Exhausted by ordinary income? Or can only be exhausted by capital gains?
Either. Capital gains are netted against losses first, then if you still have a loss (between carryover and current year activity), you can reduce ordinary income by up to 3,000, or up to the loss if the loss is less than 3,000.
Velit id fugit provident dolorum nobis. Quia officia id iste omnis nihil et quod. Non id exercitationem laudantium asperiores dolores omnis incidunt nihil. Magni aut autem quia mollitia facilis. Cumque eum alias voluptatum.
Et quis quia quia voluptas perferendis officia sit. Autem molestiae facilis odio consequatur sed perspiciatis qui. Consequuntur aut fugiat voluptas id autem fugit occaecati exercitationem. In quidem eligendi et quaerat earum quis ipsum.
Similique blanditiis tempore autem dolores porro voluptatibus non. Ipsa illum rem dolor sit quos voluptatum dicta.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...