Capital Loss Carryover Calculator
A net capital loss offsets up to $3,000 of other income a year ($1,500 married filing separately); the rest carries forward with no expiration, keeping its short-term or long-term character (IRC §§1211(b), 1212(b)). Enter this year's Schedule D figures to get the deduction and next year's carryover, line by line.
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Figure this year's carryover
Watch a carryover meet installment gain
Filing status comes from the form above. Same worksheet run each year; no other capital gains or losses assumed.
How does a capital loss carryover work?
Capital losses first offset capital gains. If you have a net capital loss for the year, you can deduct up to $3,000 of it against other income ($1,500 if married filing separately) under IRC §1211(b). Whatever is left carries forward to the next year under §1212(b), keeping its short-term or long-term character, for as many years as it takes. On Schedule D the carryover enters on line 6 (short-term) and line 14 (long-term).
What is the Capital Loss Carryover Worksheet?
It is the 13-line worksheet in the Schedule D instructions that splits the leftover loss into a short-term and a long-term carryover. The $3,000 deduction uses up short-term loss first (lines 5 to 8), then long-term (lines 9 to 13). Lines 1 to 4 apply §1212(b)(2): the deduction only "uses" loss to the extent of your taxable income figured without it. If your deductions already bring taxable income to zero, the loss you could not use carries forward instead of disappearing.
Worked example: short-term and long-term losses together
The calculator's default numbers: a married couple with a $5,000 net short-term loss, a $10,000 net long-term loss and $100,000 of taxable income before the deduction.
- Schedule D line 16 is a $15,000 loss. The deduction is the $3,000 limit.
- Worksheet: line 1 is $97,000, line 2 is $3,000, line 3 is $100,000, line 4 is $3,000.
- Short-term: line 5 is $5,000, line 7 is $3,000, so the short-term carryover (line 8) is $2,000.
- Long-term: line 9 is $10,000, line 11 is $0 ($3,000 minus $5,000, floored at zero), so the long-term carryover (line 13) is $10,000.
- Check: $15,000 of loss, $3,000 deducted, $12,000 carried forward.
A low-income year works differently. With an $8,000 short-term loss and only $1,000 of taxable income before the deduction, you still report a $3,000 deduction, but the worksheet treats only $1,000 as used (line 4), so $7,000 carries forward, not $5,000.
Why does a carryover fit an installment sale?
An installment sale under IRC §453 recognizes gain as the payments arrive: each principal dollar times the gross profit percentage from Form 6252. A carryover offsets that gain dollar for dollar in each year it arrives, including unrecaptured §1250 gain, which Reg. §1.453-12 places in the earliest payments and which a carryover reduces before the 15%/20% layer (§1(h)(6)(A)). Two limits: §1245 recapture is ordinary income recognized in the year of sale (§453(i)), and capital losses offset only $3,000 of ordinary income a year. The second calculator above shows the year-by-year picture: with a $150,000 long-term carryover and $100,000 of gain a year, year one is fully sheltered ($3,000 also comes off ordinary income), $47,000 carries into year two, and year two has $53,000 of taxable gain.
Losses you realize in later years are where the installment timing matters most, because there is still gain arriving to meet them. See tax loss harvesting to offset a real estate gain and The Loss Bank, a free guide on capital losses.
Where to go next
- Form 8582 worksheet: the passive-loss side of the same sale.
- Losses that can offset a property sale gain.
- Unrecaptured Section 1250 gain, the 25% layer.
- Installment sale calculator: model the payment schedule and the tax each year.
Frequently asked questions
How much capital loss can I deduct in a year?
All of it against capital gains. Beyond your gains, up to $3,000 of net capital loss offsets other income, or $1,500 if married filing separately (IRC 1211(b)). The rest carries forward.
Does a capital loss carryover expire?
Not during your life. Under IRC 1212(b) it carries to each following year until used, keeping its short-term or long-term character. A carryover does not pass to heirs; it ends on the final return.
Why is my carryover more than my loss minus $3,000?
Because of IRC 1212(b)(2). If your taxable income without the deduction is less than $3,000, only that much of the deduction counts as using the loss. The Capital Loss Carryover Worksheet lines 1 to 4 handle this.
Can a capital loss carryover offset installment sale gain?
Yes. Capital gain recognized each year from an installment sale is offset by the carryover dollar for dollar, including unrecaptured Section 1250 gain. Section 1245 recapture is ordinary income recognized in the year of sale, and capital losses reach only $3,000 of it.
Which is used first, the short-term or the long-term carryover?
On Schedule D the short-term carryover nets against short-term gains and the long-term carryover against long-term gains, then net results cross over. For the $3,000 deduction, the worksheet uses short-term loss first.
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Educational only, not tax, legal or investment advice. Examples are illustrative. Have your CPA or tax attorney review your facts before you act. Hans Goldstein is a licensed insurance agent (CA Insurance License #4273294) and is not a CPA or attorney. He is paid a commission only if a structured installment sale is funded; seller financing pays him nothing. Disclosures.