What is a capital loss carryover?
When you sell investments for less than you paid, you realize a capital loss. Each year, those losses first offset your capital gains. If your losses are larger than your gains, you can use up to $3,000 of the excess ($1,500 if married filing separately) to reduce other income. Whatever is left carries over to future tax years, with no expiration, until you use it up.
If you have a carryover from a prior year, it is shown on your most recent Schedule D and on your Capital Loss Carryover Worksheet. Short-term and long-term amounts are tracked separately.
Does Boldin model it?
Not yet. Boldin does not have a field for an existing capital loss carryover, so the Planner does not apply it against future gains. If you have a carryover, your projected taxes on investment sales may be higher than they will be in real life.
You can approximate the effect with the workaround below. It uses inputs you already have in the Planner.
Before you start
Find your carryover amount on your most recent tax return (Schedule D and the Capital Loss Carryover Worksheet).
Note how much is short-term and how much is long-term.
How to model your carryover
Use a placeholder account to lower the taxable gain Boldin calculates by the amount of your carryover. This works when you expect to sell investments from a taxable account, either through withdrawals or through regular turnover.
Reduce the balance of your primary taxable account by the amount of your carryover. Leave its cost basis as it is.
Add a new after-tax account and give it capital gains tax treatment.
Enter the carryover amount as the balance of the new account. Enter the same amount as its cost basis, so the account has no gain.
Set the rate of return on the new account to 0%.
Add a one-time expense or a transfer from the new account for the carryover amount.
Review your Taxes pages to confirm projected capital gains tax has dropped.
Here is an example with a $40,000 carryover.
Primary taxable account | Before | After |
Account balance | $300,000 | $260,000 |
Cost basis | $180,000 | $180,000 |
Gain Boldin can tax | $120,000 | $80,000 |
Keep in mind:
Name the new account something clear, such as Capital loss carryover, and exclude it from withdrawals so Boldin does not spend it.
If you have more than one taxable account, reduce the one you expect to sell from first.
The tax savings appear as Boldin models sales from your primary account, so the timing may not match the years your real loss would apply.
Keep your estimate current
Boldin does not track your carryover from year to year. Each time you file your taxes, check your new carryover amount and update the balances to match. Carryover losses end at death, so they do not pass to heirs.
Related requests
A capital loss carryover feature is on our list of feature requests. If this matters to your plan, let us know through the in-app feedback option or by writing to support.