21 Jun How can I use carry forward losses?
Q. In 2008, many people including myself took significant losses selling stocks, fearing the worst for our economy. Besides categories like gains on stocks, investment home sales, antiques and art, is there any other way to use carry forward losses?
— Seeking tax savings
A. Many taxpayers like you still have capital loss carryovers from years like 2008.
Taxpayers are allowed to deduct a net capital loss of $3,000 against other income each year, said Len Nitti, a certified public accountant with Wilkin & Guttenplan in East Brunswick.
“Other than this small annual deduction allowed, you must have capital gain income in order to utilize these losses,” Nitti said.
He said capital gain income can come in a number of forms including stock, investment home and collectible sales, as you noted.
Additionally, he said, sales of certain business property — rental real estate, goodwill and other business assets to the extent that the gain exceeds any depreciation recapture taxable at ordinary rates — held for greater than a year, certain distributions from mutual funds and gains from sales of personal homes and property can be taxable as capital gains income.
“Fortunately, the IRS does not limit the number of years you can carry forward unused capital loss carryovers,” Nitti said. “These losses can continue to be carried forward into the future until you have capital gains or the losses are fully utilized by the $3,000 per year deduction allowed.”
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This post was first published in June 2017.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.