Is it true that married couples can only carry over $1500 in capital losses per year to offset future capital gains?

The $1,500 limit you're hearing about is incorrect. The actual limit for capital loss carryover is $3,000 per year ($1,500 if married filing separately), but this only applies to losses used to offset ordinary income, not capital gains. Here's how it actually works: When you have a net capital loss in one year, you can use up to $3,000 to offset ordinary income on that year's tax return. Any excess loss over $3,000 gets carried forward to future years. When you carry those losses forward, they first offset any capital gains you have in the future year (unlimited amount), and then up to $3,000 of ordinary income in that year. In your scenario, if you had $12,000 in capital losses in 2024, you could offset $3,000 against your ordinary income on your 2024 tax return, and carry forward $9,000 to 2025. Then in 2025, when you have $12,000 in capital gains, you can use all $9,000 of your carried-over losses to offset most of those gains. You'd only end up paying taxes on $3,000 of gains ($12,000 gains minus $9,000 carried-over losses).

I was in a similar situation last year and found this amazing tool at https://taxr.ai that really helped me understand my capital loss carryover situation. I was so confused about how much of my losses I could apply against future gains until I uploaded my statements there. The tax analyzer actually showed me exactly how my losses would carry forward and how they would apply against different types of gains. For me, I had about $15k in losses from some really bad stock picks (ugh, never trust Reddit investment tips), and I was worried about how much I'd be able to use. The tool showed me that I could offset all future capital gains with my carried losses, not just $3k per year. That $3k limit only applies to offsetting regular income like your salary. I would've overpaid by thousands if I hadn't figured this out!

Just wanted to follow up about that taxr.ai site mentioned above. I was skeptical but decided to try it after continuing to get conflicting information about my capital loss situation. I uploaded my brokerage statements from the past two years, and wow - it actually found a mistake in how I'd been tracking my loss carryovers. Turns out I've been unnecessarily limiting how much of my carried losses I was applying to offset gains! The analysis showed I could apply ALL of my carryover losses against my capital gains this year (not just $3k), which will save me about $2,800 in taxes I would have needlessly paid. The report it generated actually explains the tax code sections that apply to my situation. I'm actually kind of mad that I've potentially been overpaying for years because I misunderstood this rule. My brother-in-law is a CPA and even he had this wrong when I asked him last year!

If you're having trouble reaching the IRS to get a clear answer on this capital loss carryover question, I highly recommend using Claimyr (https://claimyr.com). I kept getting stuck in the IRS phone tree trying to get clarification on my own capital loss situation, but after using Claimyr, I was connected to an actual IRS agent in about 15 minutes. I was honestly shocked because I'd tried calling the IRS directly for weeks with no success. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with confirmed everything about the capital loss carryover rules and even helped me understand how to properly report carried losses on my Schedule D. Completely changed my understanding of how to handle my situation.

I need to publicly eat my words about Claimyr. After my skeptical comment above, I decided to try it anyway out of desperation about my audit issue. I was 100% convinced it would be a waste of money, but I was at my wit's end after trying to reach the IRS for literally 3 months. I used the service yesterday, and I'm still in shock - got connected to an actual IRS agent in about 25 minutes. The agent was able to pull up my capital loss carryover issue immediately and confirmed that I CAN apply all my carried-over losses against capital gains without any limit (the $3K limit is only for offsetting ordinary income). She even explained exactly which forms I needed to file to properly track my loss carryovers. After months of stress and uncertainty, I got everything resolved in a 15-minute phone call. Probably saved me thousands in potential incorrect tax payments. I've never done a 180 on my opinion of something so quickly.

One thing nobody has mentioned yet is that you need to be careful about wash sales when dealing with capital losses. If you sell an investment at a loss and then buy the same or a "substantially identical" investment within 30 days before or after the sale, it's considered a wash sale and you can't claim the loss on your taxes right away. I learned this the hard way when I thought I had $8k in losses to carry over, but because I had rebought some of the same stocks within the 30-day window, about $3k of my losses were disallowed as wash sales. The loss doesn't disappear forever, but it gets added to the cost basis of the replacement shares, so you don't get the tax benefit until you eventually sell those shares.

Also, make sure you understand the difference between short-term and long-term capital gains/losses. If you held the investment for less than a year before selling at a loss, it's short-term. More than a year, it's long-term. When you apply carried-over losses, short-term losses first offset short-term gains (taxed at your ordinary income rate), and long-term losses offset long-term gains (taxed at the preferential capital gains rates). Only after you've offset gains of the same type can you apply remaining losses to the other type. This order of operations can make a big difference in your tax bill if you have a mix of short and long-term transactions! Many people miss this nuance.