Carryforward Losses
In short
Unused capital losses that roll forward to offset future gains
If you lose $15,000 on investments but only have $5,000 in gains and can use $3,000 against income, you have $7,000 left over. You can 'carry forward' that $7,000 to use in future years when you have gains.
Capital losses exceeding capital gains plus the $3,000 ordinary income deduction can be carried forward indefinitely to future tax years. Loss carryforwards are valuable — they reduce future tax bills and make tax-loss harvesting even more powerful over time.
Formula
Carryforward = Total Losses - Gains Used - $3,000 Income OffsetRelated concepts
- Tax-Loss Harvesting — If you're up $10,000 on Apple but down $3,000 on another stock, you can sell the loser to offset $3,000 of your Apple gains. You only pay tax on $7,000 instead of $10,000. The IRS lets you use losses to cancel gains.
- Capital Gains Tax — When you sell an investment for more than you paid, the profit is a capital gain and the government taxes it. Hold less than a year = higher rate (up to 37%). Hold more than a year = lower rate (0%, 15%, or 20%).
- Annual Loss Limit — Even if you lose money in the stock market, you can use up to $3,000 of those losses to reduce your regular taxable income. Lose $10,000? Deduct $3,000 now and carry the rest forward to future years.