Tax Deduction carry forward - May or Must?
Tax Deduction carry forward - May or Must?
I have 2 related questions, the first is only for future reference but the second is something I need to know for filing my 2022 taxes.
1) If you have a lot of capital losses that you can't use this year, you can use them in future years to apply against capital gains and the excess at $3,000 per year against regular income. But what if your income the next year is so low that you already don't have to pay income tax? Are you required to use them up anyhow? And if your income is so low that you don't even need to file, what happens then? Does it make a difference if you do or don't have capital gains?
2) I purchased a new car in 2022 that qualifies for a tax rebate, but it isn't a refundable amount. I need to have a tax due for it to subtract from. However, I have a very large carried forward charitable donation that will cut down or eliminate my tax due. Am I required to use up the donation this year and miss my rebate? Or can I decide how much of it I want to claim so that I wind up with a full rebate and no tax due and I can use the remaining deductions in following years?
2a) In a related note, I also have some charitable deductions for donations I made in 2022. I'm assuming I have to claim them this year or lose them forever. Right?
Thank you for any expert advice. I hope I explained my situation clearly.
1) If you have a lot of capital losses that you can't use this year, you can use them in future years to apply against capital gains and the excess at $3,000 per year against regular income. But what if your income the next year is so low that you already don't have to pay income tax? Are you required to use them up anyhow? And if your income is so low that you don't even need to file, what happens then? Does it make a difference if you do or don't have capital gains?
2) I purchased a new car in 2022 that qualifies for a tax rebate, but it isn't a refundable amount. I need to have a tax due for it to subtract from. However, I have a very large carried forward charitable donation that will cut down or eliminate my tax due. Am I required to use up the donation this year and miss my rebate? Or can I decide how much of it I want to claim so that I wind up with a full rebate and no tax due and I can use the remaining deductions in following years?
2a) In a related note, I also have some charitable deductions for donations I made in 2022. I'm assuming I have to claim them this year or lose them forever. Right?
Thank you for any expert advice. I hope I explained my situation clearly.
High risk does not equal high reward. It equals high risk of no reward.
Re: Tax Deduction carry forward - May or Must?
1) See p. D-11 in https://www.irs.gov/pub/irs-pdf/i1040sd.pdf for the 2021->2022 carryover, and Worksheet 4-1. Capital Loss Carryover Worksheet for the 2022->2023 carryover.
2) & 2a) Not familiar with carry forward charitable donations, but Publication 526 (2022), Charitable Contributions | Internal Revenue Service probably has the answer. Good luck!
2) & 2a) Not familiar with carry forward charitable donations, but Publication 526 (2022), Charitable Contributions | Internal Revenue Service probably has the answer. Good luck!
Re: Tax Deduction carry forward - May or Must?
Thank you, but I have spent hours studying both those documents and I can't find the answers there. That's why I came here, hoping someone could help.
High risk does not equal high reward. It equals high risk of no reward.
Re: Tax Deduction carry forward - May or Must?
What do you get when you fill out the worksheets for #1?
Re: Tax Deduction carry forward - May or Must?
If I were to fill it out it would tell me the amount I can carry forward. But that isn't my question.
High risk does not equal high reward. It equals high risk of no reward.
Re: Tax Deduction carry forward - May or Must?
For capital loss carryovers there is no option: you must use them, or not, based on the worksheets cited.
For charitable deduction carryovers, it appears you get some choice. For example, there is the following wording in Pub. 526:
For charitable deduction carryovers, it appears you get some choice. For example, there is the following wording in Pub. 526:
Thus, don't feel bad that you were unable to find the answer in that publication. With any luck someone with experience there will post.Special rules exist for computing carryovers if you...Claim the standard deduction in a carryover year...Because of their complexity and the limited number of taxpayers to whom these additional rules apply, they aren't discussed in this publication.
Re: Tax Deduction carry forward - May or Must?
26 CFR § 1.170A-10 - Charitable contributions carryovers of individuals appears to address that issue. Unfortunately my Universal Translator is on the fritz so I'm currently unable to render that in comprehensible form.
Re: Tax Deduction carry forward - May or Must?
That's a good find. I thought at first it might answer my question if I could figure it out. Then I noticed it pertained to 1970 rules, so probably wouldn't still be correct.
High risk does not equal high reward. It equals high risk of no reward.
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Re: Tax Deduction carry forward - May or Must?
1. You subtract $3,000 from your carryover even if you can't use it that year.auntie wrote: ↑Fri Jun 09, 2023 2:38 pm I have 2 related questions, the first is only for future reference but the second is something I need to know for filing my 2022 taxes.
1) If you have a lot of capital losses that you can't use this year, you can use them in future years to apply against capital gains and the excess at $3,000 per year against regular income. But what if your income the next year is so low that you already don't have to pay income tax? Are you required to use them up anyhow? And if your income is so low that you don't even need to file, what happens then? Does it make a difference if you do or don't have capital gains?
2) I purchased a new car in 2022 that qualifies for a tax rebate, but it isn't a refundable amount. I need to have a tax due for it to subtract from. However, I have a very large carried forward charitable donation that will cut down or eliminate my tax due. Am I required to use up the donation this year and miss my rebate? Or can I decide how much of it I want to claim so that I wind up with a full rebate and no tax due and I can use the remaining deductions in following years?
2a) In a related note, I also have some charitable deductions for donations I made in 2022. I'm assuming I have to claim them this year or lose them forever. Right?
Thank you for any expert advice. I hope I explained my situation clearly.
2. The charitable contribution carryover rules appear to only apply to contributions in excess of the annual limit.
Re: Tax Deduction carry forward - May or Must?
Not necessarily. If income is low enough, the carryover remains as is from year to year. See the worksheets for details.toddthebod wrote: ↑Fri Jun 09, 2023 4:41 pm 1. You subtract $3,000 from your carryover even if you can't use it that year.
Re: Tax Deduction carry forward - May or Must?
The examples use 1970 and 1971, but AFAIK the law itself remains as written. E.g., see 26 CFR § 1.170A-10 - Charitable contributions carryovers of individuals. - Content Details - CFR-2014-title26-vol3-sec1-170A-10.
That still leaves the issue of deciphering it....
Re: Tax Deduction carry forward - May or Must?
OK, I'll get to work deciphering it. This may take some time. Thanks.
High risk does not equal high reward. It equals high risk of no reward.
Re: Tax Deduction carry forward - May or Must?
My head is spinning and my eyes are glazed over. Just when I think I have found the answer I see something that tells me no. I'll leave it for today and study it some more tomorrow. What a way to spend my 78th birthday.
High risk does not equal high reward. It equals high risk of no reward.
Re: Tax Deduction carry forward - May or Must?
I don't use tax software. Maybe I should.
High risk does not equal high reward. It equals high risk of no reward.
Re: Tax Deduction carry forward - May or Must?
Re: Tax Deduction carry forward - May or Must?
Tax software can be useful to check most common tax law situations. Whether any of the usual suspects would cover things of which the IRS itself says, "Because of their complexity and the limited number of taxpayers to whom these additional rules apply, they aren't discussed in this publication" is less clear.
Definitely would be nice if it does....
Re: Tax Deduction carry forward - May or Must?
It handles this one.FiveK wrote: ↑Fri Jun 09, 2023 8:17 pmTax software can be useful to check most common tax law situations. Whether any of the usual suspects would cover things of which the IRS itself says, "Because of their complexity and the limited number of taxpayers to whom these additional rules apply, they aren't discussed in this publication" is less clear.
Definitely would be nice if it does....
Re: Tax Deduction carry forward - May or Must?
I'm sure auntie would appreciate details.nalor511 wrote: ↑Sat Jun 10, 2023 12:01 amIt handles this one.FiveK wrote: ↑Fri Jun 09, 2023 8:17 pmTax software can be useful to check most common tax law situations. Whether any of the usual suspects would cover things of which the IRS itself says, "Because of their complexity and the limited number of taxpayers to whom these additional rules apply, they aren't discussed in this publication" is less clear.
Definitely would be nice if it does....
Re: Tax Deduction carry forward - May or Must?
This is why we pay big bucks to lawyers.