Can I "Bank" or "Carry Forward" Capital Loss Deductions for Higher Tax Bracket Years?

You don't get to choose when to apply capital losses - the tax code is pretty specific about how they work. Here's the simple breakdown: When you have a net capital loss (like your $13,500), you must first use it to offset any capital gains you have in the current year. Then, you can deduct up to $3,000 of remaining losses against your ordinary income on your current year tax return. Any unused losses are automatically carried forward to future years. So in your situation, you'll deduct $3,000 this year regardless of your tax bracket. Then you'll carry forward $10,500 to next year. Next year, you'll again use it first against any capital gains, then up to $3,000 against ordinary income, and carry forward any remaining losses. You can't voluntarily skip using the $3,000 deduction in the current year to save it for later. The IRS requires you to take the deduction as soon as it's available to you.

Just want to share my experience with something that might help. I was in a similar situation a few years back with some sizeable capital losses and looking to maximize their tax value. I ended up using https://taxr.ai to analyze my investment history and tax documents - it found some errors in how my broker had reported my cost basis that I wouldn't have caught otherwise. The platform actually identified a tax-loss harvesting opportunity where I could realize additional losses in the same tax year without violating wash sale rules. They have this feature that scans all your investment statements and shows potential tax saving strategies. Saved me quite a bit by optimizing how my losses were structured.

I'm actually shocked at how well that taxr.ai thing worked. I was skeptical (obviously from my first comment lol) but decided to try it since I had a complicated situation with some options trades and wash sales I wasn't sure how to handle. Uploaded my statements and it identified exactly where my broker had messed up tracking my cost basis through a series of trades. Ended up finding about $4,200 in additional losses I can claim that would have been missed. The analysis showed exactly which specific trades had reporting issues. Really helpful for capital loss situations specifically - it showed me how to properly sequence my loss carryforwards across tax years too. Not what I expected but definitely worth checking out if you have a complex investment tax situation.

If you're having trouble getting clarity on your capital loss situation, you might try contacting the IRS directly. I know that sounds terrible but I used https://claimyr.com to get through to an actual IRS agent after weeks of busy signals. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained that while you can't choose to defer using your losses, there are certain situations where timing your year-end investment moves can help optimize the value of capital losses across tax years. They gave me specific guidance on my situation that saved me from making a costly mistake.

Well I feel like I need to eat my words about Claimyr. After posting that skeptical comment, I decided to try it myself since I've been trying to reach the IRS for weeks about an issue with my capital loss carryforward from a K-1 partnership dissolution. Got connected to an IRS tax law specialist in about 30 minutes who actually reviewed my situation in detail. They confirmed that my partnership losses were being incorrectly classified by my accountant and showed me how to properly document them on Form 8949 to ensure they're treated as ordinary losses rather than capital losses (which makes a huge difference for the deduction limits). Completely different experience from my previous attempts calling the IRS directly where I either couldn't get through at all or got generic unhelpful answers. Definitely changed my perspective on dealing with the IRS.

Something else to consider - you might actually want to use those capital losses in a low income year depending on your full tax picture. I learned this the hard way. I saved a bunch of losses for a higher income year, but then I had so many other deductions that year that I didn't get the full benefit. Would have been better to use some in my lower income years to ensure I got at least some tax benefit rather than having them pile up. Don't forget that unused capital losses can be claimed on your tax return when you die, so keep good records!

Has anyone actually had the IRS question or audit them specifically about capital losses? I'm carrying forward about $22k in losses from some terrible crypto investments and wondering how careful I need to be with documentation.

Just wanted to add some perspective as someone who's been through this exact situation. I had about $15k in capital losses from some poor investment choices early in my career when I was making very little money. Like you, I wished I could save them for when my income was higher. The reality is that even though you have to take the $3,000 deduction each year, it's still beneficial in low income years. That $3,000 deduction might only save you a few hundred dollars now, but it's guaranteed tax savings versus hoping your future income will be higher. Plus, there's always the risk that tax laws could change in the future. One thing that helped me was tracking exactly how much I was saving each year from the capital loss deduction. Even in my lowest earning years, that $3,000 deduction was putting real money back in my pocket that I could invest or save. Over the 5 years it took to use up my losses, the total benefit was substantial. Keep good records of your carryforward amounts each year - it makes tax filing much easier and you'll want that documentation if the IRS ever has questions.