Where Is Capital Loss Carryover on Your Tax Return?

On a federal return, a capital loss carryover appears in three places: Schedule D Line 6 for the short-term portion, Schedule D Line 14 for the long-term portion, and Form 1040 Line 7a, where up to $3,000 of net capital loss ($1,500 if married filing separately) can offset ordinary income.¹ Anything above that limit rolls forward to next year through the Capital Loss Carryover Worksheet in the Schedule D instructions.²

Pull the Numbers From Last Year’s Return First

You need two figures before you touch this year’s Schedule D: your short-term carryover and your long-term carryover from the prior year.

Start with your prior year’s Schedule D, Line 21. If that number is shown in parentheses, you have a net loss for that year and may have a carryover into this one. A carryover exists if the loss on Line 21 was larger than the loss on Line 16, or if your taxable income on Form 1040 was below zero before the capital loss deduction was applied.²

The precise numbers live on the prior year’s Capital Loss Carryover Worksheet from the Schedule D instructions. Line 8 of that worksheet is your short-term carryover. Line 13 is your long-term carryover. Tax software generates and saves this worksheet with your return. If you filed by hand and don’t have it, you can rebuild it using the current year’s Schedule D instructions along with your prior Schedule D and Form 1040.

Where the Carryover Goes on Schedule D

Enter the short-term carryover on Schedule D, Line 6, in Part I. Enter the long-term carryover on Line 14, in Part II. Part I nets the short-term carryover against any short-term gains or losses from the current year; Part II does the same for long-term items.²

A carryover keeps the character of the original loss. Short-term stays short-term; long-term stays long-term.³ That distinction matters because short-term gains are taxed at ordinary rates while long-term gains get preferential rates, so a short-term carryover offsetting a short-term gain saves more tax than a long-term carryover doing the same work against a long-term gain.

Schedule D combines the results of Parts I and II on Line 16 and produces the final net figure on Line 21.

Carryovers Skip Form 8949

Form 8949 is for reporting individual sales and exchanges of capital assets, transaction by transaction.⁴ Prior-year carryovers are not transactions, so they bypass Form 8949 entirely and go directly on Schedule D, Lines 6 and 14.²

If your only capital items for the year are a carryover, capital gain distributions from Form 1099-DIV, and certain other specific items, you may be able to file Schedule D alone and skip Form 8949 altogether.⁵

The $3,000 Limit on Form 1040 Line 7a

When your total capital losses (including the carryover) exceed your capital gains for the year, the excess is deductible against ordinary income, but only up to $3,000 per year ($1,500 for married filing separately).¹ The amount lands on Form 1040, Line 7a, and reduces adjusted gross income.⁶

The $3,000 cap is fixed by statute and is not indexed for inflation. Anything above the cap rolls forward. There is no expiration on a capital loss carryover; it continues year after year until it is fully used.³

Figuring What Rolls Into Next Year

If this year’s net capital loss is larger than $3,000 ($1,500 if married filing separately), complete the Capital Loss Carryover Worksheet in the Schedule D instructions. It calculates how much loss carries into next year and splits that amount into a short-term piece (Line 8) and a long-term piece (Line 13). Those two numbers become next year’s entries on Schedule D, Lines 6 and 14.²

The worksheet takes your taxable income into account, not just the flat $3,000 cap. If your taxable income was already zero or negative before the capital loss deduction, you did not actually benefit from the full $3,000, so more of the loss carries forward than a simple subtraction would suggest.³ Tax software runs this calculation for you. If you file by hand, working through the worksheet every year is the only way to keep an accurate chain of carryovers.

Two Situations That Change What You Can Carry

Wash Sales Never Enter the Carryover

Selling a security at a loss and buying the same or a substantially identical security within 30 days before or after the sale is a wash sale, and the loss is disallowed.⁷ A disallowed wash sale loss is preserved by being added to the cost basis of the replacement shares, not by carrying forward. It never becomes part of your capital loss carryover, because it was never deductible in the year of the sale.

Carryovers End at Death

An unused carryover can be claimed on the final income tax return filed for a person who died, subject to the same $3,000 annual limit. Any balance left after that final return is lost; it does not pass to heirs and cannot be used by the estate.⁸ If the surviving spouse files a joint return for the year of death, the carryover can be used on that joint return. In later years, the surviving spouse can only continue to use the portion of the carryover that came from their own losses.

How Long to Keep the Supporting Records

The general IRS recordkeeping rule is three years from the filing date, or six years if income was underreported by more than 25%.⁹ Because a capital loss carryover can roll forward indefinitely, the practical rule is longer: keep the records as long as you are still carrying the loss.

That means retaining copies of every Schedule D, every Capital Loss Carryover Worksheet, any Form 8949 filed with those returns, and the brokerage statements documenting the original transactions. Once the last of the loss is absorbed, keep the return that used it, plus at least three more years of records.

1
Office of the Law Revision Counsel. 26 USC 1211 Limitation on Capital Losses
2
Internal Revenue Service. 2025 Instructions for Schedule D (Form 1040) – Section: Capital Loss Carryover Worksheet Lines 6 and 14
3
Office of the Law Revision Counsel. 26 USC 1212 Capital Loss Carrybacks and Carryovers
4
Internal Revenue Service. Instructions for Form 8949
5
Internal Revenue Service. 1040 (2025) Instructions – Section: Line 7a
6
Internal Revenue Service. Topic No. 409 Capital Gains and Losses
7
Office of the Law Revision Counsel. 26 US Code 1091 Loss From Wash Sales of Stock or Securities
8
IRS.gov. Decedent Tax Guide
9
Internal Revenue Service. Topic No. 305 Recordkeeping