For capital loss carryover from
2004 to 2005, or for 2005 to 2006.
Click here if you need to calculate a capital loss carryover
from 2003 to 2004. See below for more information about this
worksheet.
Explanation of Worksheet
This worksheet can be used for capital losses carried from
2004 to 2005, or from 2005 to 2006. The only difference is the
entry on line 1 of the worksheet comes from line 40 on the 2004
return and line 41 on the 2005 return.
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 40 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 ones included in IRS Publication
550 for 2004 returns and for 2005 returns. At one time the IRS provided this
worksheet in the instructions for Schedule D, but now they
provide the previous year's carryover worksheet in the
current year's instructions. As a result, you need Publication
550 — or this page — to find out how much capital loss you're
carrying forward from the current year to the next year.
The numbers in the highlighted boxes will be used to make
entries on Schedule D for the following year. Check your results
independently; we provide no warranty for calculations on this
worksheet.
