How to Apply Previous Years' Capital Losses Against Current AGI + New Stock Gains

You actually don't have a choice here - the tax code requires you to use capital loss carryovers as soon as you have capital gains to offset them against. You can't choose to only use part of your loss carryover to keep yourself in a certain tax bracket. The good news is that using your $93k in capital losses against your $140k gain means you'll only be taxed on about $47k of capital gains, which should help keep your overall tax burden lower this year. When calculating your estimated tax payment for Q1, you'll need to include this net capital gain of $47k in your AGI calculation. Don't forget that capital gains are taxed at different rates than ordinary income depending on how long you held the assets.

I was in almost the exact same situation last year! After trying to figure it out myself for hours, I finally used taxr.ai (https://taxr.ai) to analyze my investment statements and past returns. It showed me exactly how my carryover losses had to be applied and calculated my estimated payments automatically. The tool saved me from making a huge mistake - I was planning to only use part of my carryover losses too! It identified that I needed to use all my carried-over losses first before making any strategic tax decisions. The estimated payment calculator also factored in the different tax rates for short vs long-term gains which I had completely overlooked.

Just wanted to update after trying taxr.ai - wow, I'm honestly impressed. I was super skeptical (as you can see from my comment above), but it actually sorted through my mess of documents and figured out my exact loss carryover amount. I had been calculating my estimated payments completely wrong. The tool showed me I was about to significantly underpay for Q1 which would have triggered penalties. It also confirmed what others said here - you have to use ALL carryover losses once you have gains. The visualization of how my AGI changed after applying the losses made it super clear. Now I actually understand how this all works instead of just guessing!

If you're still struggling with this after trying the software options, I'd recommend calling the IRS directly. They can explain exactly how to handle your specific situation with the capital loss carryovers. I spent WEEKS trying to get through to them last tax season about a similar issue. After countless busy signals and disconnects, I finally discovered Claimyr (https://claimyr.com) - they got me connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to apply my previous losses against current gains and helped me calculate the correct estimated payment. Saved me from making a $4,000 mistake on my quarterly payments.

I have to eat my words. After my skeptical comment above, I got desperate enough to try Claimyr. I literally had an IRS tax specialist on the phone within 20 minutes after trying for MONTHS on my own. The agent confirmed everything that's been said here about capital losses - you must use all carryover losses against current gains, you can't choose to use only part of them to stay in a lower bracket. She also explained that I needed to report the net gain on Form 1040 Schedule D and include it when calculating my estimated tax payment. The clarity was worth every penny (way cheaper than my accountant who kept dodging my questions).

Something nobody's mentioned yet - make sure you're separating your short-term and long-term capital losses/gains correctly when doing these calculations. They offset each other in a specific order according to IRS rules: 1. Short-term losses offset short-term gains 2. Long-term losses offset long-term gains 3. If one type has net loss and other has net gain, the net loss offsets the net gain This can significantly impact your tax situation since long-term gains are typically taxed at more favorable rates.

Make sure you're also considering state taxes in your calculations! I completely forgot about state-level capital gains taxes when doing my estimates last year and got hit with an underpayment penalty in my state.

Great thread everyone! I've been dealing with a similar situation and wanted to add a few practical tips from my experience: 1. **Keep detailed records** - Make sure you have documentation of your carried-over losses from previous years' tax returns (Schedule D from each year). The IRS won't calculate this for you. 2. **Consider timing of future trades** - Since you're required to use all carryover losses this year, think strategically about any additional trades you might make before year-end. You might want to harvest some gains now while you have losses to offset them. 3. **Don't forget about the wash sale rule** - If any of your current gains or previous losses involved stocks you bought/sold within 30 days of each other, the wash sale rule could complicate your calculations. 4. **Plan for next year** - After using up your $93k in carryover losses, you'll be starting fresh next year. Consider whether you want to harvest any losses before December 31st to have carryovers available for 2026. The key takeaway everyone's mentioned is correct - you must use ALL carryover losses against current gains. But proper planning around this requirement can still help optimize your overall tax situation!