Keep the loss record, not just the deduction. The capital loss carryover worksheet calculates how much unused investment loss moves into a later tax year and separates the short-term and long-term amounts. It matters when your tax return deducts only part of a net capital loss.
This guide uses the published 2025 individual Schedule D instructions, checked October 20, 2026. Their worksheet calculates carryovers from 2024 into 2025. Use the instructions for the return year you are preparing; do not mistake a worksheet’s publication year for the year the loss originally occurred.
Where to find the official capital loss carryover worksheet
Start with the IRS Schedule D information page and open the instructions for the appropriate tax year. The individual version is Schedule D for Form 1040, rather than the separate corporate or estate forms.
The 2025 Schedule D instructions contain the Capital Loss Carryover Worksheet for lines 6 and 14. For carryovers from 2025 into 2026, those instructions point readers to the 2026 instructions when available, or Publication 550 for figuring the amount beforehand. Keep the completed worksheet with your records.
What a capital loss carryover means
A carryover is an unused tax loss available for a later year, subject to the applicable rules. It is not a refund balance, a credit or money remaining in your brokerage account.
IRS Topic 409 explains that capital losses first offset capital gains. When losses exceed gains, the deduction against other income is generally limited to the smaller of the net loss or $3,000, reduced to $1,500 for married filing separately. Remaining eligible losses can carry forward.
The $3,000 figure therefore is not a cap on every use of capital losses. A taxpayer with substantial capital gains may use more losses against those gains. Our guide to realized and unrealized investment gains explains why a price decline on an unsold investment differs from a completed transaction.
Gather these records before starting
- The prior year’s filed Form 1040, 1040-SR or applicable individual return.
- The matching prior-year Schedule D and any amended figures.
- The worksheet from the correct return-year instructions.
- Earlier carryover worksheets and supporting investment records.
Label your working papers with two years: the year producing the remaining loss and the year receiving it. For example, write “2024 loss carried into the 2025 return.” This simple label can prevent importing a worksheet twice after changing tax software.
A brokerage statement alone generally does not establish your complete carryover. You may have transactions at several brokers, prior carryovers or tax adjustments outside one statement. Organize records across accounts; our comparison of IRAs and taxable brokerage accounts explains why account type matters.
How the worksheet moves from income to carryover
For the 2025 worksheet, the calculation begins with the prior year’s taxable-income figure and capital-loss deduction. It then works through the short-term and long-term components separately. The short-term result appears on worksheet line 8 and transfers to 2025 Schedule D line 6. The long-term result appears on worksheet line 13 and transfers to Schedule D line 14. Check your own year’s labels before entering anything.
Do not replace the income calculation with an automatic subtraction of $3,000. IRS Publication 550 explains that negative taxable income can affect the amount used in figuring a carryover. Short-term and long-term losses retain their character, and short-term losses are used first for the annual deduction.
Example: a straightforward short-term loss
Assume a single taxpayer’s 2024 Schedule D shows a $10,000 short-term loss, no long-term gain or loss, and a $3,000 deduction. Assume taxable income after that deduction is positive and there are no other relevant adjustments.
For this simplified example, the 2025 worksheet starts with the $3,000 deduction and has sufficient income to use it. The short-term calculation subtracts that $3,000 from the $10,000 short-term loss. The result is a $7,000 short-term carryover. There is no long-term carryover.
This is an illustration of the worksheet’s mechanics, not a statement that every $10,000 investment loss produces the same result. Different gains, filing status, income or adjustments change the inputs.
Example: mixed losses and low taxable income
Consider a different hypothetical single taxpayer with a $2,000 net short-term loss and an $8,000 net long-term loss. Assume a $3,000 capital-loss deduction, sufficient positive taxable income and no other adjustments.
The annual deduction uses the $2,000 short-term loss first, then $1,000 of the long-term loss. That leaves zero short-term carryover and $7,000 long-term carryover. Keeping the two categories separate preserves the information needed for the next return.
Now consider why low income matters. Suppose a taxpayer instead has only a $10,000 short-term loss and a $3,000 Schedule D deduction, but taxable income would be negative $2,000 if the return allowed that negative entry. Combining negative $2,000 with the $3,000 deduction gives $1,000 for the worksheet’s income limitation. With no long-term gain, the illustrative short-term carryover is $9,000, rather than $7,000.
Reconstructing negative taxable income may require more than reading a displayed zero. Follow the official instructions or have a tax preparer review the underlying return.
Common errors to avoid
- Using the wrong year. A worksheet in the 2025 instructions looks back to 2024.
- Combining both carryover categories. Preserve separate short-term and long-term results.
- Treating the deduction as a credit. A $3,000 deduction does not automatically reduce tax by $3,000.
- Ignoring corrections. An amended prior return can change the starting amounts.
- Trusting an import without checking it. Compare the software’s figures with your saved records.
Publication 550 also says the allowable current-year deduction must be considered in calculating carryover even if you did not claim it or file a return. You cannot simply preserve the entire loss by skipping the deduction. Special situations, including changes from joint to separate filing, deserve individual review.
Frequently asked questions
Is the capital loss carryover worksheet the same as Schedule D?
No. The worksheet supports the carryover calculation; Schedule D reports the applicable results alongside other capital gains and losses. Use the matching instructions and retain your calculation.
Does the carryover automatically expire after one year?
For individuals, eligible unused capital losses can generally continue into later years until used. Keep a year-by-year record; do not apply corporate carryover rules to an individual return.
Will a broker provide the carryover amount?
Your overall return determines it. A broker’s report covers its own reporting responsibilities and may not reflect other accounts, earlier losses or your taxable-income calculation.
What if the tax software shows a different result?
Check the tax years, filing status, prior Schedule D entries, short-term and long-term allocation, and negative-income treatment. Investigate the discrepancy rather than overwriting the result to match a rough estimate.
A final check before filing
Keep a short reconciliation showing the opening carryovers, the filed return’s results and the closing carryovers. Save it with the supporting returns so you can explain the next year’s entries without recreating the entire history. A clear worksheet record is more useful than a note containing one unexplained total.
General U.S. federal tax education, based on the published 2025 materials reviewed October 20, 2026. State treatment and individual circumstances can differ. Use the correct tax-year IRS instructions and seek qualified help for a disputed or complex calculation.