Taxes can be daunting, but understanding how to properly account for carryovers can save you a significant amount of money in the long run. If you've found yourself with losses, deductions, or credits that couldn't be fully utilized in a previous tax year, you're likely dealing with a carryover. TurboTax, while incredibly helpful, requires accurate input to ensure these carryovers are applied correctly. This guide will walk you through the process of filling out the carryover worksheet in TurboTax, step by step, so you can maximize your tax benefits.
Are you ready to unlock the full potential of your past tax years? Let's dive in!
Understanding Carryovers: Why They Matter
Before we get into the "how-to," let's quickly clarify what carryovers are and why they're so important. A carryover refers to an amount (like a loss, deduction, or credit) that you couldn't use in the current tax year to reduce your taxable income or tax liability. Tax laws often allow you to "carry over" these unused amounts to future tax years, or sometimes even carry them back to prior years, to reduce your tax burden in those periods.
Ignoring carryovers can mean leaving money on the table. TurboTax is designed to help you, but it relies on you providing the correct starting figures for these carryovers.
Step 1: Gather Your Prior Year Tax Returns and Worksheets
This is perhaps the most crucial initial step. You simply cannot accurately fill out carryover information without having your prior year's tax documentation at hand.
What to look for:
Your prior year's IRS Form 1040 and accompanying schedules (e.g., Schedule D for capital gains/losses, Schedule C for business income/loss, Schedule E for rental income/loss).
Any "Carryover Worksheets" generated by TurboTax or your tax preparer in previous years. These are internal TurboTax forms that explicitly show the carryover amounts.
If you used TurboTax Online: Log into your account and navigate to "Your tax returns & documents" for the relevant prior years. You can often download a PDF of your complete return, including worksheets.
If you used TurboTax Desktop (CD/Download): Locate your
.taxfiles for the prior years on your computer. Open them with the corresponding year's TurboTax software to view and print the necessary forms and worksheets. Search for*.tax[year](e.g.,*.tax2023) to find them.
Pro Tip: Don't rely solely on the main IRS forms for carryover amounts. Many carryovers are calculated on internal worksheets that might not be part of the standard tax return printout. If you can't find these, you might need to re-open your prior year's TurboTax file and print a more comprehensive version of your return, specifically including worksheets.
Step 2: Identify the Type of Carryover You Have
Carryovers aren't a one-size-fits-all concept. Different types of losses, deductions, and credits have their own rules for carryover. Knowing which type you're dealing with will help you navigate TurboTax effectively.
Here are the most common types of carryovers you might encounter:
Capital Loss Carryover: If your capital losses exceed your capital gains plus the allowed deduction ( for married filing separately) in a given year, the unused portion is carried over to the next year. This is a very common carryover.
Net Operating Loss (NOL) Carryover: This generally applies to businesses or individuals with substantial business losses. If your deductible business expenses exceed your income, you might have an NOL that can be carried forward.
Passive Activity Loss (PAL) Carryover: Losses from passive activities (like rental properties where you don't materially participate) are generally limited to passive income. Any excess passive loss is suspended and carried forward until you have passive income to offset it, or you dispose of the activity.
Charitable Contribution Carryover: If your cash contributions to qualified charities exceed 60% of your Adjusted Gross Income (AGI) or non-cash contributions exceed 50% of your AGI (or 30% for certain types of property), the excess can be carried forward for up to five years.
Tax Credit Carryovers: Certain tax credits, like the Foreign Tax Credit or General Business Credits, may have carryover provisions if you couldn't use the full amount in the current year.
Step 3: Navigating TurboTax to Input Carryovers
The specific steps within TurboTax can vary slightly depending on the version (Online vs. Desktop) and the tax year, but the general flow remains similar. We'll outline the common paths for different carryover types.
Sub-Step 3.1: Capital Loss Carryover
This is one of the most frequently encountered carryovers.
For TurboTax Online:
Log in to your TurboTax account and open your current year's return.
Go to the "Wages & Income" section (or similar, depending on the navigation).
Look for "Investments" or "Investment Income".
Find the section for "Stocks, Mutual Funds, Bonds, Other" or "Capital Gains and Losses (Schedule D)". Click "Start" or "Revisit".
You'll typically be asked if you sold any investments in the current year. Even if you didn't, you need to proceed to the screens where capital loss carryovers are handled.
Eventually, you should come to a screen asking about "Capital Loss Carryover from prior years" or similar wording. Here, you will enter the short-term and long-term capital loss carryover amounts from your prior year's Capital Loss Carryover Worksheet (or Schedule D, line 21, if that's all you have). Be sure to enter the full carryover amount, not just the annual $3,000 deduction. TurboTax will apply the limit.
For TurboTax Desktop:
Open your current year's TurboTax program and your tax file.
Go to the "Federal" tab, then "Wages & Income".
Scroll down to "Investment Income".
Click "Start" or "Update" next to "Capital Loss Carryover".
You'll be prompted to enter your prior year's short-term and long-term capital loss carryovers.
Alternatively, you can go to "Forms" mode (if using Desktop) and directly search for "Capital Loss Carryover Worksheet" to enter the amounts there. However, using the step-by-step interview is generally recommended to ensure all related questions are answered.
Sub-Step 3.2: Net Operating Loss (NOL) Carryover
NOLs are more complex and generally require careful calculation. TurboTax often doesn't automatically track NOLs from year to year; you typically need to manually calculate and enter them.
For TurboTax Online/Desktop:
Go to the "Business" tab (or "Wages & Income" then "Business Items").
Look for a section titled "Less Common Business Situations" or "Business Deductions and Credits".
Find "Net Operating Loss (NOL)/QBI Carryforward Loss" or similar. Click "Start" or "Revisit".
You will typically be prompted to enter your NOL carryforward amount from the prior year. Enter the loss as a positive number.
Important Note: For NOLs, it's highly recommended to consult IRS Publication 536, "Net Operating Losses (NOLs) for Individuals, Estates, and Trusts," to correctly calculate your carryover amount before entering it into TurboTax, especially if this is your first time carrying over an NOL or if you're switching tax software.
Sub-Step 3.3: Passive Activity Loss (PAL) Carryover
This applies to activities like rental real estate where you are not considered a "material participant."
For TurboTax Online/Desktop:
Go to the "Wages & Income" section.
Find "Rental Properties and Royalties (Schedule E)" or a similar section.
If you have a current rental property, go through the interview. When you encounter screens about the property, look for a question like "Do any of these situations apply to this property?"
Check the box that states something like "I have passive activity real estate losses carried over from a prior year."
On the next screen, you will be prompted to enter the prior year's suspended passive losses for that specific property. Enter it as a negative number.
If you disposed of a passive activity in the current year, ensure you indicate that within the TurboTax interview. This is often the trigger that allows previously suspended passive losses to be fully deductible.
Sub-Step 3.4: Charitable Contribution Carryover
If you donated more than the IRS-allowed limits in a prior year, you might have a charitable contribution carryover.
For TurboTax Online/Desktop:
Go to the "Deductions & Credits" section.
Find the "Charitable Contributions" subsection.
After entering any current year donations, you should see a screen or an option related to "Charitable Contributions Carryover from [Prior Year]".
Enter the carryover amount as shown on your prior year's tax documents or worksheets.
Sub-Step 3.5: Tax Credit Carryovers (e.g., Foreign Tax Credit)
Specific tax credits can also have carryover provisions.
For TurboTax Online/Desktop (Foreign Tax Credit Example):
Go to the "Deductions & Credits" section.
Look for "Estimates and Other Taxes Paid".
Find "Foreign Tax Credit" and click "Start" or "Revisit".
Even if you didn't pay foreign taxes in the current year, you often need to proceed through the interview.
You should eventually come to a screen asking about "Foreign Tax Credit Carryovers". Here, you will enter the unused foreign tax credit from prior years. Sometimes you need to trigger Form 1116 to appear by indicating you have foreign taxes, even if you enter $0 for current year taxes, to get to the carryover input screen.
Step 4: Review and Verify
Once you've entered your carryover amounts, it's absolutely critical to review your return carefully.
Use the "Forms" mode (Desktop) or "Preview Return" (Online): Look for the carryover worksheets (e.g., Capital Loss Carryover Worksheet, Passive Activity Loss Carryover Worksheet).
Compare to Prior Year Data: Double-check that the carryover amounts you entered match what you found on your prior year's return or worksheets.
Check Impact on Current Year: See how the carryovers have impacted your current year's taxable income and tax liability. For example, a capital loss carryover should reduce your current year's capital gains (if any) and then potentially your ordinary income by up to $3,000. An NOL carryover should reduce your gross income.
If anything looks incorrect or unexpected, go back through the interview section where you entered the carryover data. It's easy to accidentally miss a box or enter a number incorrectly.
Step 5: Save and File Your Return
Once you are confident that all carryovers have been accurately accounted for, you can proceed with saving and filing your tax return. Remember to keep a copy of your current year's return, including all generated worksheets, for your records. This will make next year's tax preparation much smoother!
Frequently Asked Questions about TurboTax Carryovers
Here are 10 common "How to" questions related to carryovers in TurboTax, with quick answers:
How to find my prior year carryover amounts if I don't have the worksheet? You'll need to access your prior year's TurboTax file (online or desktop). Open that return and navigate to the "Forms" view (desktop) or "Preview Return" (online) to locate the specific carryover worksheets or relevant schedules (like Schedule D for capital losses) that show the carryforward figures.
How to manually enter a carryover if TurboTax doesn't automatically import it? Most carryovers are entered in specific sections of the "Wages & Income" or "Deductions & Credits" areas. For example, capital loss carryovers are under "Investment Income," while charitable contributions are under "Deductions & Credits." You'll typically find a screen asking for "prior year carryover" amounts.
How to know if I have a capital loss carryover? If your Schedule D (Capital Gains and Losses) in a prior year showed a net capital loss exceeding $3,000 (or $1,500 for MFS), the excess would generally be carried over. Look at line 21 of your prior year Schedule D or your Capital Loss Carryover Worksheet.
How to apply a Net Operating Loss (NOL) carryover in TurboTax? In TurboTax, navigate to the "Business" section, then "Less Common Business Situations" or "Business Deductions and Credits." Look for "Net Operating Loss/QBI Carryforward Loss." You'll enter the NOL amount here (as a positive number). Remember to calculate the NOL amount accurately before entering.
How to enter a passive activity loss (PAL) carryover for a rental property? When going through the rental property interview under "Wages & Income" (Schedule E), you'll encounter a screen with questions about the property. Check the box indicating you have "passive activity real estate losses carried over from a prior year" and enter the amount when prompted.
How to claim a charitable contribution carryover in TurboTax? Go to "Deductions & Credits," then the "Charitable Contributions" section. After entering any current year donations, you'll typically find a screen specifically asking about "Charitable Contributions Carryover from [Prior Year]."
How to find the Federal Carryover Worksheet in TurboTax Desktop? In TurboTax Desktop, once your return is open, go to the "Forms" button (usually in the top right or bottom left, depending on the version). In the list of forms on the left, you can scroll down or search for "Federal Carryover Worksheet" or the specific carryover worksheet you need (e.g., "Capital Loss Carryover Wks").
How to correct an incorrect carryover amount imported by TurboTax? If TurboTax imported an incorrect carryover, go to the specific section where that carryover is entered (e.g., Investment Income for capital losses). You should be able to edit the amount directly on the input screen. If it's greyed out, you might need to go back to an earlier screen in the interview that feeds that data.
How to view all carryovers on my TurboTax return before filing? In TurboTax Online, use the "Preview Return" or "Print Center" option. In TurboTax Desktop, go to "Forms" mode. In both, you can usually view all generated forms and worksheets, including the various carryover worksheets, which will summarize your carryover amounts.
How to ensure my carryovers are properly tracked for future years? By accurately entering your prior year carryovers, TurboTax will generally calculate the remaining carryover for the next year and store it within your tax file. Always save a copy of your completed return, including all worksheets, as a PDF for easy reference in subsequent tax years.