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Capital Loss Carryover Worksheet

For capital loss carryover from 2003 to 2004.

Click here if you need to calculate a capital loss carryover from 2004 to 2005. See below for more information about this worksheet.

1.	Enter the amount from 2003 Form 1040, line 38. If a loss, enter as a negative amount (with a minus sign)
2.	Enter the loss from 2003 Schedule D, line 18, as a positive amount
3.	Combine lines 1 and 2. If zero or less, enter -0-
4.	Enter the smaller of line 2 or line 3
If line 7b of 2003 Schedule D is a loss, go to line 5; otherwise, enter -0- on line 5 and go to line 9.
5.	Enter the loss from 2003 Schedule D, line 7b, as a positive amount
6.	Enter any gain from 2003 Schedule D, line 16
7.	Add lines 4 and 6
8.	Short-term capital loss carryover to 2004. Subtract line 7 from line 5. If zero or less, enter -0-. If more than zero, enter on 2004 Schedule D, line 6
If line 16 of 2003 Schedule D is a loss, go to line 9; otherwise, skip lines 9 through 13.
9.	Enter the loss from 2003 Schedule D, line 16, as a positive amount
10.	Enter any gain from Schedule D, line 7b
11.	Subtract line 5 from line 4. If zero or less, enter -0-
12.	Add lines 10 and 11
13.	Long-term capital loss carryover to 2004. Subtract line 12 from line 9. If zero or less, enter -0-, If more than zero, enter on 2004 Schedule D, line 14

Explanation of Worksheet

As a general rule, the amount of capital loss you're allowed to use in any taxable year is equal to the amount of capital gain you have for that year plus $3,000 ($1,500 if married filing separately). The part you don't use because of this limitation carries over to the next year. Also, a capital loss may carry over because there was not enough income. For example, a child's custodial account may produce $500 in interest income and $2,000 in capital losses. If these are the only income items, the capital loss will carry over, as explained here.
    The worksheet serves two purposes: it determines how much capital loss carries over to the next year, and also tells how much of the carryover is short-term and how much is long-term.
    The first four lines of the worksheet are designed to determine how much of your capital loss was consumed. Note that line 1 of this worksheet can be negative for someone who has a small amount of income. For example, for a child with $500 in interest income and $2,000 in capital losses, line 1 would be -2,300, which is $500 minus the $2,000 capital loss and the $800 standard deduction. It makes a difference on this worksheet to enter a negative number instead of zero, so make sure you followed instructions in calculating line 38 of Form 1040.
    The next four lines determine how much short-term capital loss will carry over to the next year, and the last five lines determine how much long-term loss will carry over. Note that if you have capital loss in both categories, the rules require you to use short-term loss first when applying the loss (up to $3,000) against ordinary income.
    This worksheet is based on one included in the Schedule D instructions for 2004 returns. Check your results independently; we provide no warranty for calculations on this worksheet.

Schedule D
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