You can see what your CARRYOVER CAPITAL LOSSES are on your most recent tax return. Why is this important? As you might recall from our previous email on Capital Gains, you can use losses from one asset class to offset gains from the same, or a different, asset class. You are also able to use losses from previous years to offset gains in the current year.

You can find both your short- (line 6) and long-term (line 14) capital loss carryover on your Schedule D – Capital Gains and Losses form of your tax return. It’s beyond the scope of this email, but there are some rules that come into play as to which can offset each other. The important thing to know is that you have carryover losses, how much, and what types. You are able to write off $3,000 in losses each year (as of 2024), which includes your carryover losses if you are not using them in the current year to offset capital gains.

A Story: we have worked with several clients that have enjoyed seeing their home values rise quickly over the last decade UNTIL it is time to sell. They are faced with a large capital gains bill and are not looking forward to seeing that check go to the IRS. The GOOD NEWS is that we worked over the last 3-4 years to lock-in capital losses when we had investments drop in value. We were able to carefully avoid “wash sales” and harvest those losses (future email) for future use. We will now be able to use those carryover losses to offset some, or all, of the capital gains from the sale of their property!

Next up: How the Tax-Free Bucket Can Fund Long-Term Care + “Shadow Taxes”

Disclosures

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.