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. Any prior year carryover losses are combined with the capital gains and losses in future years.
Capital Loss Carryover Worksheet
To figure any capital loss carryover from the prior year to the current year, use the Capital Loss Carryover Worksheet from the current Schedule D instructions. To complete the worksheet, you will need information from the prior year's return.
If tax software was used to prepare the prior year 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 to the current year.