how do short term gain/loss vs long term gain/loss offset with carryover

[yoyo2012]

Need some help understanding how offsetting works when there's carryover.

My understanding is gain/loss of same type offset first and then you can offset short term with long term. But how does it work when there's a carryover.

Example (hypothetical):
For 2022, I have short term loss carryover of 20K and long term loss carryover of 10k.

For 2023, I have short term gain of 20k and long term loss of 20k.

Does the offsetting rules apply to 2023 first before looking at carryover? In this case, would the short term gain of 20k be offset by long term loss of 20k? And I just keep my carryover from 2022 for 2024 onward?

Or do the offsetting rules apply irrespective of the year? If that's the case then my short term 20k gain of 2023 would be offset by 2022 short term loss of 20k. And I would carryover 30k of long term loss.

Thank you

[livesoft]

The carryover is not simply "carryover." One keeps track of the short-term carryover and the long-term carryover. See Form 1040 Schedule D for the big picture.

[yoyo2012]

I understand that. My question is more how does the offsetting work when there is a carryover (of both short and long term).

[toddthebod]

Does the offsetting rules apply to 2023 first before looking at carryover? In this case, would the short term gain of 20k be offset by long term loss of 20k? And I just keep my carryover from 2022 for 2024 onward?

Or do the offsetting rules apply irrespective of the year? If that's the case then my short term 20k gain of 2023 would be offset by 2022 short term loss of 20k. And I would carryover 30k of long term loss.

Thank you

The first one. You apply it to the same year first. Then you would apply $3,000 of your short-term loss against your income for 2023, carrying forward $17,000 of short-term losses and $10,000 of long-term losses to 2024. (And I'm fairly sure, though not 100% certain, that you use up $3,000 of short-term losses each year even if you do not have ordinary income to apply it against.)

[FiveK]

See Form 1040 Schedule D for the big picture.

+1

yoyo2012, would your 2023 Schedule D have the following?
total of lines 1a-5 = $20,000
line 6 = -$20,000
line 7 = $0

total of lines 8a-13 = -$20,000
line 14 = -$10,000
line 15 = -$30,000

If so, then your capital loss carryovers for 2024 returns (see Worksheet 4-1. Capital Loss Carryover Worksheet) would be $0 short term and $27,000 long term.