Carryover Losses

A taxpayer cannot take net losses of more than $3,000 ($1,500 for married taxpayers filing separately) in figuring taxable income for any single tax year. The allowable loss is referred to as the deduction limit. Unused losses can be carried over to later years until they are completely used up. The carryover losses are combined with the gains and losses that actually occur in the next year.

Capital Loss Carryover Worksheet

To figure any capital loss carryover from 2010 to 2011, use the Capital Loss Carryover Worksheet from the 2011 Schedule D instructions. To complete the worksheet, you will need information from the 2010 return.

If tax software was used to prepare the 2010 return, ask the taxpayer for a copy of the software's Schedule D Worksheet (Capital Loss Carryovers from This Year to Next Year) from the previous year to determine the carryover amounts from 2010 to 2011.

• Enter short-term capital loss carryovers on Schedule D, Part I, line 6
• Enter long-term capital loss carryovers on Schedule D, Part II, line 14

If the taxpayer's 2011 capital loss exceeds the deduction limit and the remainder must be carried forward to 2012, remind the taxpayer to bring a copy of the 2011 return when the 2012 return is prepared. Make a note on the outside of the taxpayer's tax return record envelope to help alert next year's preparer.