Key Takeaways
- When your capital losses are bigger than your capital gains, you can take only $3,000 of the extra off your other income each year, and the rest carries over to later years.
- A single 80-year-old with a $45,000 carryover and no gains would need 15 years to use it all.
- If he dies five years in, his estate and heirs can’t use the $30,000 he hasn’t deducted.
- There’s no limit on how much gain a carryover can offset, so selling investments he’d sell during his lifetime anyway, before Dec. 31, lets him use the loss while he can.
If your capital losses are bigger than your gains, the IRS lets you take only $3,000 of the extra off your other income each year. And whatever you haven’t used when you die is gone for good. With the Nasdaq Composite down 6% on Nov. 5 alone and Dec. 31 less than two months away, it’s worth knowing how fast a carryover actually gets used.
A $45,000 loss, $3,000 at a time
Let’s take a hypothetical single 80-year-old with $45,000 of capital losses carried over from past years. He has no capital gains this year, so the carryover can only go against his other income, like his IRA withdrawals.
When your capital losses are bigger than your capital gains, you can take the extra off your other income only up to $3,000 a year, or $1,500 if you’re married filing separately. The rest carries over to the next year, and the year after that, until it’s all used up.
But he can’t carry it past his death. His final return can take one last deduction within the same $3,000 limit. After that, his estate can’t deduct what’s left or carry it to later years, and neither can his heirs. On the Nov. 5 episode of Retirement Planning Education, Andy Panko was blunt about someone who dies with losses still unused: “If you’re single, that all goes away. It just stops.”
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At 80, 15 years is a long runway
At $3,000 a year, he needs 15 years to work through $45,000 ($45,000 ÷ $3,000). That takes him to 95, assuming he has no gains along the way.
If he dies five years in, his five deductions add up to $15,000, counting the last one on his final return. That leaves $30,000 of losses that nobody can ever deduct. That’s two-thirds of the loss, gone.
It also makes harvesting new losses in this sell-off a lot less useful for him. He has no gains to set them against, so any new net loss he takes this year goes on the same pile. At $3,000 a year, it just pushes his last deduction further past 95.
Gains use it up much faster
Capital losses offset capital gains first, with no limit at all, and only the net loss left after that is capped at $3,000. So if he sells $30,000 of investments that have gone up this year, the carryover wipes out the whole gain and still covers a $3,000 deduction against his other income. That leaves $12,000 ($45,000 – $30,000 – $3,000), and four more years at $3,000 use that up, all inside the same five years.
Say his other income puts those gains in the 15% bracket, which for a single filer in 2026 covers taxable income above $49,450 and up to $545,500. Then $30,000 of gains that would otherwise cost him $4,500 in tax ($30,000 × 15%) come through tax-free. If his income keeps the gains in the 0% bracket instead, the carryover still offsets them first, and he saves nothing on them.
But he only comes out ahead on investments he’d sell during his lifetime anyway. An heir’s cost basis is generally the property’s value on the day the owner died, so the gain built up before then isn’t taxed when the heir sells. Selling a stock or fund he’d otherwise keep until death just to use up the loss doesn’t save his heirs a dime.
Plan this year’s sales before Dec. 31
A gain on a stock or fund sale is taxed in the year of its trade date, so a sale has to go through by Dec. 31 to land on his 2026 return. After the Nasdaq’s drop, a rebalance before year-end is exactly the kind of sale he’d make during his lifetime anyway. That could mean trimming what’s still up, or raising cash for the next few years of spending.
If I were 80 with $45,000 of losses on the books, I’d stop harvesting new ones and go looking for the gains I was planning to take over the next few years anyway. Those are the sales where a loss that might otherwise go to waste saves real money.
Of course, nobody knows how many years he has. If he makes it to 95, the $3,000 a year gets through the whole $45,000 on its own.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
