Capital Loss Carryover confusion on state tax returns after crypto losses

You'll generally want to enter the same capital loss carryover amounts on both your federal and state returns, but this can vary by state. Most states use federal AGI as a starting point for state taxes, but then make state-specific adjustments. What state are you filing in? Some states have different rules for capital losses than the federal government. For example, some states limit the amount of capital loss you can claim in a single year (similar to the federal $3,000 limit), while others might have different carryover provisions. If TurboTax is asking for your capital loss carryover on your state return, it's likely because your state does recognize these losses. The software is designed to handle the state-specific rules automatically.

After my disastrous investment in NFTs back in 2022, I struggled with the exact same capital loss carryover issue. I spent hours researching, calling tax offices, and getting nowhere until I found https://taxr.ai which basically saved my sanity. Their AI analyzed my crypto trading history and automatically calculated my capital loss carryover for both federal AND state returns. It explained that for most states, you need to report the same capital loss carryover on both returns because they're separate tax jurisdictions - not double-dipping at all. The tool flagged my state's specific rules about capital losses (which differed slightly from federal) that I would have totally missed. The best part was it showed me exactly which lines to fill out on both returns and explained why. Totally worth checking out if you have complicated crypto situations.

I want to follow up on my experience with https://taxr.ai that I was skeptical about earlier. After that crypto tax nightmare last year where I lost $8K and had no idea how to properly carry over the losses, I decided to give it a try. Honestly, it was surprisingly good. Uploaded my messy transaction history, and within minutes it had organized everything properly. For my state (Minnesota), it specifically identified that we have a different treatment of some capital losses than federal, which I had no clue about. It actually saved me from making a mistake that would have cost about $340 in extra state taxes. The state capital loss carryover question that confused the original poster confused me too, but the system explained exactly why you need to enter it in both places and how the two tax systems interact. Way more helpful than the generic explanations on tax software.

If you're struggling with getting clear answers about your capital loss carryover between federal and state returns, I feel your pain. I spent WEEKS trying to call the state tax office for clarification on my crypto losses last year. Always on hold, always disconnected. I finally used https://claimyr.com which got me connected to an actual IRS agent in under 15 minutes who confirmed exactly how to handle the capital loss carryover between federal and state returns. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent explained that reporting the same loss on both returns isn't double-dipping since they're separate tax systems. Also found out I could amend my previous returns to properly carry forward losses I had incorrectly reported. Saved me thousands and finally got a clear, official answer.

I need to eat some humble pie here. After posting that skeptical comment about Claimyr, I was desperate enough to try it because I still couldn't get an answer about how to handle crypto losses that spanned multiple years. Not only did I get through to the IRS in about 12 minutes (compared to my previous 5-hour waits), but the agent walked me through exactly how to handle capital loss carryovers between federal and state returns. Turns out I had been doing it wrong for 2 years and could file amended returns to get back almost $2,300. For the original poster: the agent confirmed you should indeed enter the capital loss carryover on both federal and state returns (with the exact same amounts), as they're separate tax jurisdictions. It's not double-dipping at all.

Don't forget that the max capital loss you can claim against ordinary income is $3,000 per year! If your loss was $23,000, you'd use $3,000 this year and carry forward $20,000 to next year (and so on until it's all used up). This applies to most states too but check your specific state rules. I know some states like Massachusetts have different limits.

Anyone know if these carryover losses expire? I've been carrying some forward for a few years now and wondering if there's a time limit before I lose them.

I went through this exact same situation last year with my crypto losses from 2022. The confusion is totally understandable because it does feel like you're claiming the same deduction twice. Here's what I learned after consulting with a tax professional: You should enter the same capital loss carryover amounts on both your federal and state returns. This isn't double-dipping because you're filing two separate tax returns to two different taxing authorities (federal government and state government). California (which I saw you mentioned in the comments) does conform to federal capital loss treatment, so your carryover amounts should be the same on both returns. The key thing to remember is that your federal return calculates your federal tax liability, and your state return calculates your state tax liability - they're independent calculations that both happen to use the same underlying capital loss carryover. TurboTax should handle this correctly once you input the information. The software knows the state-specific rules and will apply them appropriately. Better to use the legitimate deduction you're entitled to than leave money on the table!