Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Capital loss puts AGI below zero
Posted by: Pamo, January 14, 2018 10:14AM
Dear forum members,

I live overseas, and so all of my wages are deductible according to the Foreign Earned Income credit. Effectively my income is zero outside of investments.

I have a loss in the stock market and thus when completing Schedule D it tells me to enter the full deduction of $3,000 on line 13 of form 1040. It's essentially useless to me, though, and my AGI then goes into the negative.

I'd rather keep the loss and carry it over to future years to be used as a deduction against potential future capital gains/taxable wages.

Am I required to claim this deduction on line 13 of f1040 or is there some way to carry it over?

Second, it seem that there is no benefit to a negative AGI. The instructions say "If line 37 is less than zero, you may have a net operating loss (NOL) that you can carry to another tax year. See the Instructions for Form 1045 for details."

But publication 536 says that "Capital losses in excess of capital gains"... are not allowed when figuring a NOL.

Am I understanding this correctly?

Thanks in advance for your help with this.

Re: Capital loss puts AGI below zero
Posted by: kaneohe, January 14, 2018 02:22PM
Yes, you are understanding it correctly w/ this one small omission: you don't get to choose when to use your capital loss. You must use it each yr. However under certain circumstances, even tho you use it, you don't lose it....yours is one. There is a wksht to determine this..............

[fairmark.com]

[www.irs.gov]
wksht on p. D-11

Re: Capital loss puts AGI below zero
Posted by: triad, January 14, 2018 06:52PM
See the instructions for schedule D in the following year. You will calculate the amount of your loss carry forward using worksheets. These worksheets take into account a negative AGI (they start with the line after the standard/itemized deduction), so it's possible that some or all of the loss will carried forward.

Most people do not have a negative AGI, so they do use up the $3000 loss each year.

Re: Capital loss puts AGI below zero
Posted by: Pamo, January 16, 2018 12:27PM
Dear Kaneohe and Triad,

Thank you so much- you're right. When I actually fill out the capital loss carryover worksheet for the following year, I still have the same amount of carryover as line 7 and 15 from the current year. The loss carryover worksheet starts from line 41, which is even more in the negative than Line 37.

It's hard to figure out what's going on with these worksheets when you're using them, so I didn't even realize that would be the result. Thanks again! That's really good...

Re: Capital loss puts AGI below zero
Posted by: Drewremedy, January 17, 2018 01:53AM
Of course there is a window to make modest income /gains in effectively a zero bracket to make current use of that negative number .

Caution , stay healthy, if you have large loss positions you effectively lose the ability to use losses if you die ....or recognize some gains if you have them...consider it a free step up to market .



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