Tax Deduction carry forward - May or Must?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
User avatar
Topic Author
auntie
Posts: 347
Joined: Mon Dec 08, 2008 11:49 am

Tax Deduction carry forward - May or Must?

Post by auntie »

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.
High risk does not equal high reward. It equals high risk of no reward.
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Tax Deduction carry forward - May or Must?

Post by FiveK »

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!
User avatar
Topic Author
auntie
Posts: 347
Joined: Mon Dec 08, 2008 11:49 am

Re: Tax Deduction carry forward - May or Must?

Post by auntie »

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.
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Tax Deduction carry forward - May or Must?

Post by FiveK »

What do you get when you fill out the worksheets for #1?
User avatar
Topic Author
auntie
Posts: 347
Joined: Mon Dec 08, 2008 11:49 am

Re: Tax Deduction carry forward - May or Must?

Post by auntie »

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.
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Tax Deduction carry forward - May or Must?

Post by FiveK »

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:
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.
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.
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Tax Deduction carry forward - May or Must?

Post by FiveK »

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. :(
User avatar
Topic Author
auntie
Posts: 347
Joined: Mon Dec 08, 2008 11:49 am

Re: Tax Deduction carry forward - May or Must?

Post by auntie »

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.
toddthebod
Posts: 5738
Joined: Wed May 18, 2022 12:42 pm

Re: Tax Deduction carry forward - May or Must?

Post by toddthebod »

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.
1. You subtract $3,000 from your carryover even if you can't use it that year.

2. The charitable contribution carryover rules appear to only apply to contributions in excess of the annual limit.
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Tax Deduction carry forward - May or Must?

Post by FiveK »

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.
Not necessarily. If income is low enough, the carryover remains as is from year to year. See the worksheets for details.
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Tax Deduction carry forward - May or Must?

Post by FiveK »

auntie wrote: Fri Jun 09, 2023 4:27 pm 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.
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....
User avatar
Topic Author
auntie
Posts: 347
Joined: Mon Dec 08, 2008 11:49 am

Re: Tax Deduction carry forward - May or Must?

Post by auntie »

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.
nalor511
Posts: 5062
Joined: Mon Jul 27, 2015 1:00 am

Re: Tax Deduction carry forward - May or Must?

Post by nalor511 »

auntie wrote: Fri Jun 09, 2023 4:58 pm OK, I'll get to work deciphering it. This may take some time. Thanks.
Just mock it up using this year's tax software with next year's numbers.
User avatar
Topic Author
auntie
Posts: 347
Joined: Mon Dec 08, 2008 11:49 am

Re: Tax Deduction carry forward - May or Must?

Post by auntie »

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.
User avatar
Topic Author
auntie
Posts: 347
Joined: Mon Dec 08, 2008 11:49 am

Re: Tax Deduction carry forward - May or Must?

Post by auntie »

nalor511 wrote: Fri Jun 09, 2023 5:02 pm
auntie wrote: Fri Jun 09, 2023 4:58 pm OK, I'll get to work deciphering it. This may take some time. Thanks.
Just mock it up using this year's tax software with next year's numbers.
I don't use tax software. Maybe I should.
High risk does not equal high reward. It equals high risk of no reward.
AE81
Posts: 39
Joined: Sat Apr 06, 2013 10:23 pm

Re: Tax Deduction carry forward - May or Must?

Post by AE81 »

auntie wrote: Fri Jun 09, 2023 6:32 pm 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.
Happy birthday auntie!
nalor511
Posts: 5062
Joined: Mon Jul 27, 2015 1:00 am

Re: Tax Deduction carry forward - May or Must?

Post by nalor511 »

auntie wrote: Fri Jun 09, 2023 6:33 pm
nalor511 wrote: Fri Jun 09, 2023 5:02 pm
auntie wrote: Fri Jun 09, 2023 4:58 pm OK, I'll get to work deciphering it. This may take some time. Thanks.
Just mock it up using this year's tax software with next year's numbers.
I don't use tax software. Maybe I should.
Quite useful to answer such hypotheticals
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Tax Deduction carry forward - May or Must?

Post by FiveK »

nalor511 wrote: Fri Jun 09, 2023 8:06 pm
auntie wrote: Fri Jun 09, 2023 6:33 pm
nalor511 wrote: Fri Jun 09, 2023 5:02 pm
auntie wrote: Fri Jun 09, 2023 4:58 pm OK, I'll get to work deciphering it. This may take some time. Thanks.
Just mock it up using this year's tax software with next year's numbers.
I don't use tax software. Maybe I should.
Quite useful to answer such hypotheticals
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....
nalor511
Posts: 5062
Joined: Mon Jul 27, 2015 1:00 am

Re: Tax Deduction carry forward - May or Must?

Post by nalor511 »

FiveK wrote: Fri Jun 09, 2023 8:17 pm
nalor511 wrote: Fri Jun 09, 2023 8:06 pm
auntie wrote: Fri Jun 09, 2023 6:33 pm
nalor511 wrote: Fri Jun 09, 2023 5:02 pm
auntie wrote: Fri Jun 09, 2023 4:58 pm OK, I'll get to work deciphering it. This may take some time. Thanks.
Just mock it up using this year's tax software with next year's numbers.
I don't use tax software. Maybe I should.
Quite useful to answer such hypotheticals
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....
It handles this one.
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Tax Deduction carry forward - May or Must?

Post by FiveK »

nalor511 wrote: Sat Jun 10, 2023 12:01 am
FiveK wrote: Fri Jun 09, 2023 8:17 pm
nalor511 wrote: Fri Jun 09, 2023 8:06 pm
auntie wrote: Fri Jun 09, 2023 6:33 pm
nalor511 wrote: Fri Jun 09, 2023 5:02 pm
Just mock it up using this year's tax software with next year's numbers.
I don't use tax software. Maybe I should.
Quite useful to answer such hypotheticals
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....
It handles this one.
I'm sure auntie would appreciate details.
8301
Posts: 942
Joined: Thu Dec 22, 2022 1:52 pm

Re: Tax Deduction carry forward - May or Must?

Post by 8301 »

auntie wrote: Fri Jun 09, 2023 6:32 pm 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.
This is why we pay big bucks to lawyers.
Post Reply