Is it mandatory to report Capital Loss on line 21 of Schedule D?

Question

Is it mandatory to specify a capital loss value on line 21 of Schedule D? We are married filling joint return; we have capital loss over $3000 but our income is very low and we don't have to pay taxes. Can we choose to specify 0 on line 21 of Schedule D and line 13 of form 1040 so we can carryforward the entire capital loss?

Answer 1

You are not allowed to pick and choose what years to take a loss once the stock/fund is sold.

While I realize it might be too late for you to do anything now, in the future if members should read this, they might consider doing a Roth conversion during that year they will have $3000 in losses. This way they will show some income that can be offset by that loss, effectively getting a free conversion to the Roth.

Answer 2

On line 21 of Schedule D, you write the smaller of

• Line 16 (Net Short-Term Capital Gains/Losses plus Net Long-Term Capital Gains/Losses including any Capital Loss carryovers from previous years) if Line 16 is a loss
• 3000

So, in your case, since your Line 16 shows a loss of more than $3000 on Line 21, you write 3000 on Line 21 (the parentheses indicating that is it a negative number are already included on the form). Also, you write (3000) on Form 1040 Line 13. The rest of the loss is a carryover to next year (be sure to fill out the Capital Loss Carryover Worksheet where the carryover to next year is computed).

Summary: you cannot write 0 on Line 21 of Schedule D and carry over the entire loss to next year. You must deduct $3000 this year and carry over the rest of the loss to next year.