OT: Tax question

[bac2therac]

We have to have accountants on the board right?

So Ive generally been able to do my taxes myself though this year is a bit more complicated with dealing with things from my mothers estate.

So i received a K1 form. I see a small amount of dividend and that will be reported and taxable but my question is about line 11

Final year deductions D.....long term capital loss carryover..I see $4259 listed...so if I have this right, this amount then would able to be deducted from my income..Ive read only up to 3K a year and then you can carry the remaining over to the next year. Am I on the right track here.


thanks in advance

 

[mdk02]

Could have posted this on the investment thread, although nobody has ever had a loss. You can offset capital gains, short and long term, with capital losses. If you still have losses after offsetting, you can deduct up to $3000. on your current year's tax return. If there are losses left over after that, you can carry them to future years and deduct $3000 per year until they're used up.

That is UNLESS you live in New Jersey. For NJ tax purposes there is no carryforward. Pound salt.

 

[RUevolution36]

We have to have accountants on the board right?

So Ive generally been able to do my taxes myself though this year is a bit more complicated with dealing with things from my mothers estate.

So i received a K1 form. I see a small amount of dividend and that will be reported and taxable but my question is about line 11

Final year deductions D.....long term capital loss carryover..I see $4259 listed...so if I have this right, this amount then would able to be deducted from my income..Ive read only up to 3K a year and then you can carry the remaining over to the next year. Am I on the right track here.


thanks in advance

Line 21 of Sch D. is what you should be pulling over into your 1040. There is a $3k limitation if you're filing jointly. If the loss is, let's say $8k, you can deduct $3k this year, and if rules stay the same for next year, $3k next year, etc., until the loss is used up.

 

[DHajekRC84]

Could have posted this on the investment thread, although nobody has ever had a loss. You can offset capital gains, short and long term, with capital losses. If you still have losses after offsetting, you can deduct up to $3000. on your current year's tax return. If there are losses left over after that, you can carry them to future years and deduct $3000 per year until they're used up.

That is UNLESS you live in New Jersey. For NJ tax purposes there is no carryforward. Pound salt.

BAC...just in case you're wondering he's referring to NJ tax return. Its crazy, in a bad year of losses you can deduct those from Federal but not for NJ return. Our great state taxes on the upside gains, but gives zero credit in a year of net losses.

 

[IMARUFAN]

We have to have accountants on the board right?

So Ive generally been able to do my taxes myself though this year is a bit more complicated with dealing with things from my mothers estate.

So i received a K1 form. I see a small amount of dividend and that will be reported and taxable but my question is about line 11

Final year deductions D.....long term capital loss carryover..I see $4259 listed...so if I have this right, this amount then would able to be deducted from my income..Ive read only up to 3K a year and then you can carry the remaining over to the next year. Am I on the right track here.


thanks in advance

Bac,

I've always did my taxes by myself as well. But this year I finally tried TurboTax. It was awesome and I highly recommend it.

 

[mdk02]

BAC...just in case you're wondering he's referring to NJ tax return. Its crazy, in a bad year of losses you can deduct those from Federal but not for NJ return. Our great state taxes on the upside gains, but gives zero credit in a year of net losses.

You lose the carryforward, not the current year offset to the extent of current year gains.

 

[DHajekRC84]

You lose the carryforward, not the current year offset to the extent of current year gains.

Yes, what I meant. I try to manage any net losses to the 3k max if possible.

 

[bac2therac]

thanks guys

so I can deduct losses FOR THIS YEAR ONLY WITH NO CARRYOVER on the NJ state taxes, does this apply to any income or just capital gains

for federal I can deduct losses for this year for any income up to 3K and then carry any remaining over

is this correct?

 

[mdk02]

thanks guys

so I can deduct losses FOR THIS YEAR ONLY WITH NO CARRYOVER on the NJ state taxes, does this apply to any income or just capital gains

for federal I can deduct losses for this year for any income up to 3K and then carry any remaining over

is this correct?

NJ loses are strictly limited to offsetting capital gains in the current year. Only on the 1040 can $3000. of losses be applied to "ordinary" income in the current and future years.

 

[tom1944]

On the NJ return you can never have an entry less than zero. So you can never claim a loss. You can only offset a loss against a gain in the same category of income

 

[RUDutch]

Tom is correct, NJ taxes Gross Income and won't allow negatives in any category of income.

 

[bac2therac]

ok got it

 

[Jtung230]

Learned something new. I don’t like what I learned.

 

[mdk02]

On the NJ return you can never have an entry less than zero. So you can never claim a loss. You can only offset a loss against a gain in the same category of income

Tom is correct, NJ taxes Gross Income and won't allow negatives in any category of income.

And name me another state that taxes both earned income and investment income where, over a lifetime, you could realize a net, say, $150,000 in capital gains which is comprised of $200,000 of gains and $50,000 of losses where, if the timing was wrong, you'd pay tax on $200,000.?

 

[wcfan10]

We have to have accountants on the board right?

So Ive generally been able to do my taxes myself though this year is a bit more complicated with dealing with things from my mothers estate.

So i received a K1 form. I see a small amount of dividend and that will be reported and taxable but my question is about line 11

Final year deductions D.....long term capital loss carryover..I see $4259 listed...so if I have this right, this amount then would able to be deducted from my income..Ive read only up to 3K a year and then you can carry the remaining over to the next year. Am I on the right track here.


thanks in advance

Yes only 3k per year.

 

[tom1944]

I plan to keep my income under $150,000 which includes social security and I will pay zero NJ tax

 

[HeavenUniv.]

Just a note and PLEASE no political sewage—From what I understand with the new corona aid bill, you will not have to pay taxes on the first $10,200 unemployment for the year 2020. What is happening to tens of millions of people is they had taxes taken out of the usual (state) amount of unemployment, but not the extra (federal portion).

 

[tom1944]

Nothing

They will get a larger refund than if it was taxable

 

[mdk02]

Nothing

They will get a larger refund than if it was taxable

Unless they already have filed, in which case the will have to file an amended return to get that larger refund. And if they haven't filed, they will have to wait while TurboTax et. al. update their software.

 

[tom1944]

Unless they already have filed, in which case the will have to file an amended return to get that larger refund. And if they haven't filed, they will have to wait while TurboTax et. al. update their software.

I do the returns for 5 family members. I told them I am waiting until the bill passes. I want to see if child credit changes for 2020

 

[bac2therac]

the tax deadline may be pushed back to July 15...it is probably a good idea to do that

 

[mdk02]

I do the returns for 5 family members. I told them I am waiting until the bill passes. I want to see if child credit changes for 2020

I wonder how long you are going to have to wait until the software gets updated. I wonder how long the IRS will take to update THEIR software so that returns are correctly processed.

This sort of screams for an extended filing deadline.

 

[newell138]

Carryover the loss to 2024, multiply by 3 and split the difference between your children this is the tax you owe

 

[RUevolution36]

I wonder how long you are going to have to wait until the software gets updated. I wonder how long the IRS will take to update THEIR software so that returns are correctly processed.

This sort of screams for an extended filing deadline.

IRS updates before TurboTax.

 

[DHajekRC84]

I plan to keep my income under $150,000 which includes social security and I will pay zero NJ tax

I'm not an accountant. Do you know what it will be for 2021 or years going forward? (EDIT: I see that it currently maxes out at $100k) And I THOUGHT you have to be 65 to get this benefit but I see now it is 62 by the last day of the year. So I could have done it this year for MY income portion and not my wife's).

Filing Status	Exclusion Limit 2020	Exclusion Limit 2019
Married Filing Jointly	$100,000	$ 80,000
Married Filing Separate	$ 50,000	$ 40,000
Single	$ 75,000	$ 60,000

This is great BUT it flies opposite to doing Roth conversions to reduce RMD's and take advantage of lower tax rates now vs. future, and limits income unless you start pulling from non-qualified funds. AND I would need to get out of my dividend producing stocks.

NEVER MIND EDIT: looking into the numbers I now see I could totally screw up future tax savings worth tens of thousands to save $2,500 dollars per year. (Married Joint Return rate is about 2.5% on $100k) not to mention the taxable implications of selling a whole bunch of stuff to avoid dividends.

 

[DHajekRC84]

Just a note and PLEASE no political sewage—From what I understand with the new corona aid bill, you will not have to pay taxes on the first $10,200 unemployment for the year 2020. What is happening to tens of millions of people is they had taxes taken out of the usual (state) amount of unemployment, but not the extra (federal portion).

Good to know. Fell into this category a bit (20weeks) but planned for the taxes. Now I guess were due some back and exactly why I didn't file federal yet.
My friend does taxes for seniors as part of a county volunteer program. He had a 20 year old come in who was upset cause he didn't know he had to pay fed taxes on all the unemployment he got from losing his part time college job. He wasn't pissed though at the nearly $24k he got from the government for losing it. Imagine that. Making $24k during your full time college year for doing nothing.

 

[tom1944]

I'm not an accountant. Do you know what it will be for 2021 or years going forward? (EDIT: I see that it currently maxes out at $100k) And I THOUGHT you have to be 65 to get this benefit but I see now it is 62 by the last day of the year. So I could have done it this year for MY income portion and not my wife's).

Filing Status	Exclusion Limit 2020	Exclusion Limit 2019
Married Filing Jointly	$100,000	$ 80,000
Married Filing Separate	$ 50,000	$ 40,000
Single	$ 75,000	$ 60,000

This is great BUT it flies opposite to doing Roth conversions to reduce RMD's and take advantage of lower tax rates now vs. future, and limits income unless you start pulling from non-qualified funds. AND I would need to get out of my dividend producing stocks.

NEVER MIND EDIT: looking into the numbers I now see I could totally screw up future tax savings worth tens of thousands to save $2,500 dollars per year. (Married Joint Return rate is about 2.5% on $100k) not to mention the taxable implications of selling a whole bunch of stuff to avoid dividends.

Everyone's situation is different. I do not plan on doing any ROTH conversions.

 

[RUckusbuck]

thanks guys

so I can deduct losses FOR THIS YEAR ONLY WITH NO CARRYOVER on the NJ state taxes, does this apply to any income or just capital gains

for federal I can deduct losses for this year for any income up to 3K and then carry any remaining over

is this correct?

Net losses are not deductible on your NJ tax return in any capacity i.e. capital losses, losses from rental activities, etc...

 

[phs73rc77gsm83]

Everyone's situation is different. I do not plan on doing any ROTH conversions.

Totally agree, everyone’s situation is different and needs to be evaluated independently. I have been doing Roth conversions and will continue to do them because 1) we have a disproportionate amount of assets in our traditional IRAs, 2) when one of us dies, the survivor with be hit with huge tax burdens once RMDs are needed, 3) it’s a guess but I think tax rates will go up so conversions make sense for us. The iorp extended online tool is a linear programming application that can help folks work through various potential scenarios. Caveat: the program has some quirks and you have to play with it some and understand the assumptions.

 

[mdk02]

Totally agree, everyone’s situation is different and needs to be evaluated independently. I have been doing Roth conversions and will continue to do them because 1) we have a disproportionate amount of assets in our traditional IRAs, 2) when one of us dies, the survivor with be hit with huge tax burdens once RMDs are needed, 3) it’s a guess but I think tax rates will go up so conversions make sense for us. The iorp extended online tool is a linear programming application that can help folks work through various potential scenarios. Caveat: the program has some quirks and you have to play with it some and understand the assumptions.

Back in the days where more people were paying the AMT there was more of an incentive to convert enough to get out of it, pay 28% and get the tax free appreciation for future earnings.