Capital Loss Carryover.

In plain English

A capital loss carryover is the part of an investment loss you could not fully use this year, which you carry into future tax years. When your total capital losses for the year are larger than your capital gains, you can use up to a set yearly amount against ordinary income, and anything left over rolls forward. The carryover keeps going year after year until it is used up. There is no expiration, so a big loss in one bad market year can keep cutting your tax bill for a long time.

01Why it matters

A painful loss is not wasted: it can offset future gains dollar for dollar and shave a bit off your ordinary income every year until it runs out, which is real money back over time.

02The math, step by step

You sell investments at a $12,000 net loss in a year with no gains. The law lets you deduct up to $3,000 against ordinary income each year ($1,500 if married filing separately), so this year you deduct $3,000. The rest carries forward. The following year, if you have a $4,000 gain, the carryover wipes it out and you keep deducting until the $12,000 is fully used.

03What this is NOT

04Receipts

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