Using tax filing software for filing fed and state (CA) taxes in the US. I understand if I have capital losses in my child’s account, they should file their own taxes so their losses can carry over. However, when I entered in their losses ($3,500), the software says something to the effect of, 3,000 will be deductible this year. Does that mean only $500 will be carried over? They are still far away from having a job and getting an income, so I am not exactly sure what that means. Do $3,000 of losses get used up each year, which means after two years there’ll be nothing to deduct? Or if they file this year, the $3,500 loss will be “on the books” for when they do eventually have an income and file? Any info is greatly appreciated.
Is tax filing worth it for capital loss for custodial account?
byu/BrockaLe intax
Posted by BrockaLe
1 Comment
>Does that mean only $500 will be carried over?
No it does not.
When you fill out the capital loss carryover worksheet in the Schedule D instructions next year, you will be pleasantly surprised.
>Do $3,000 of losses get used up each year, which means after two years there’ll be nothing to deduct?
Capital losses only get used up in years when you have capital gains or years in which you have non-zero taxable income. However, you still have to put a 3000 loss on the Form 1040 line for capital gains. But this does NOT mean that 3000 got used up.
> Or if they file this year, the $3,500 loss will be “on the books” for when they do eventually have an income and file?
It will be on the books for when they eventually have income, even if they neglect to file.