How do I correctly apply my $4k capital gains loss carryover from 2020?

Wait, I thought dividends were considered ordinary income, not capital gains? Only qualified dividends get the preferential tax treatment, but they're still reported separately from capital gains, right? Wouldn't the $3k limit apply after considering both dividends and capital gains/losses?

You're right about the distinction - I simplified a bit too much. Qualified dividends receive the preferential tax rate similar to long-term capital gains, but they are technically not capital gains for the purpose of loss offsets. The correct sequence is: First, capital losses offset capital gains. Then, if you have excess capital losses (up to $3,000), those can offset ordinary income, which would include dividends. In your case, you'd have your $4,000 capital loss, offset $0 in capital gains, and then up to $3,000 of the remaining loss would offset ordinary income (including your $300 in dividends). The remaining $1,000 would carry forward to next year.

Does this tool handle more complex situations? I've got some wash sales and also some losses from a partnership K-1 that I'm not sure how to categorize properly. Can it handle all that or is it just for basic stock transactions?

I'm a bit skeptical about tax tools that aren't from the major companies. How does it compare with something like TurboTax or H&R Block? Are there any limitations to be aware of?

It absolutely handles complex situations including wash sales. I had several wash sales last year and it correctly identified them and explained how they affected my carryover amounts. For K-1 partnership losses, it has specific categorization options that help determine whether they're passive or non-passive losses. As for comparing with major tax software, the main difference is taxr.ai specializes in investment tax situations rather than trying to cover everything. It's more like having an investment tax specialist review your work. I still used my regular tax software for filing, but taxr.ai helped me understand exactly what numbers to enter and why. There's no limitation on complexity - actually it seems designed specifically for the complicated scenarios that the big tax programs don't explain well.

How does this service actually work? I'm not understanding how a third party can get you through to the IRS faster than calling directly. Seems like there would be privacy concerns too with your tax info.

Yeah right. So some magic service can somehow bypass the IRS phone system when millions of people can't get through? And then you just happened to get the one super helpful IRS agent who gave you all this detailed tax advice? Sorry, but that sounds way too good to be true.

It works by using their system that continually redials and navigates the IRS phone tree for you. When they get through, they call you and connect you directly to the IRS. You're actually talking directly to the IRS, not through an intermediary, so there are no privacy concerns - they just establish the connection. The reason it works is because they have technology that keeps trying all day if needed, while most of us would give up after an hour on hold. About the helpful agent - I think it's just that when you finally reach someone, the IRS staff are generally knowledgeable. I was just so used to not getting through at all that having a real conversation seemed amazing by comparison.

Schedule D has a worksheet in the instructions called the "Capital Loss Carryover Worksheet" that you should fill out each year. It's not submitted with your return, but it's the official way to calculate your carryover amount. Keep it with your tax records! There's one for 28% rate transactions and another for regular transactions. You can find it in the Schedule D instructions PDF on the IRS website.

Thanks for the tip! I didn't realize there was an official worksheet in the Schedule D instructions. I'll definitely download that and start using it instead of my homemade spreadsheet. Makes sense they'd have something for this since so many people carry losses forward, especially after market downturns.

I've noticed this too! The difference is usually because the summary screen might be showing your net capital loss after offsets, while Schedule D shows the detailed breakdown. Check Form 1040 line 7 to see the actual amount of loss being applied against your income this year (max $3k). The software is probably right, but it's showing you different stages of the calculation.