Carryovers that Cut Your Taxes in the Future

Capital loss carryover

If your capital losses exceed your capital gains, you have a capital loss carryover for the next tax year. You can use the carryover to offset capital gains plus up to $3,000 of ordinary income.

Technically, capital losses carry forward as short-term and long-term losses. However, because of netting rules, whichever type of loss you have, it will be used to offset all of your current gains and then ordinary income up to $3,000.

Limit on carryovers: Capital losses can be carried forward indefinitely; there is no fixed limit. However, capital losses end on death. They cannot be used by a surviving spouse beyond the joint return for the year of spouse’s death.

Charitable contribution carryover

If your charitable contributions are limited because of your adjusted gross income (AGI), excess amounts can be carried forward to future tax years (subject to AGI limits).

Limit on carryovers: Charitable contributions can be carried forward for 5 years. There is a special 15-year carryover rule for contributions of conservation easements.

Investment interest carryover

If your investment interest deduction is limited due to a lack of investment income, the excess can be carried over to future tax years. The annual deduction for investment interest cannot exceed investment income for the year.

Limit on carryovers: There is no fixed time limit.

Home office deduction carryover

If your home office deduction is limited because of your income from the home office activity, the excess deduction can be used on future tax returns to the extent there is sufficient income from the home office activity. You do not have to be in the same home office in the carryover year in order to use the carryover.

Limit on carryovers: There is no fixed time limit.

Net operating loss carryover

If you have a net operating loss (NOL) carryover that was not used up, you can apply the NOL to future years. The NOL is reported as a negative figure on the "other income" line on Form 1040.

Limit on carryovers: NOLs can be carried forward for up to 20 years.



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