What is a Capital loss carry-forward?
Capital loss carry-forward is a federal tax provision that allows taxpayers to carry forward capital losses that exceed the annual deduction limit of $3,000 ($1,500 for married filing separately) indefinitely until fully utilized against future capital gains or ordinary income. These carried-forward losses retain their original character as either short-term or long-term and must be used on a first-in, first-out basis. The Tax loss harvesting strategy often generates losses that benefit from carry-forward treatment, creating valuable tax assets for future years. Capital loss carry-forwards cannot be transferred to heirs, making strategic utilization during the taxpayer's lifetime essential for maximizing their tax benefits.
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