5 — Short-Term Loss Carryover Updated for tax year 2025

What this line means

The short-term capital loss you are carrying forward from last year’s return. If your total capital losses exceeded your total capital gains plus the $3,000 annual deduction limit last year, the excess short-term loss carries over to this year. Enter it here as a negative number in parentheses.

Does this apply to you?

• You had net capital losses exceeding $3,000 last year and the carryover was classified as short-term
• You completed the Capital Loss Carryover Worksheet from last year’s Schedule D instructions
• You have been carrying forward capital losses for multiple years after a large loss event

Easy to overlook

The $3,000 limit applies to the combined net loss, not each category You can deduct up to $3,000 of net capital losses against ordinary income each year ($1,500 if married filing separately). Losses beyond that carry forward. The $3,000 limit applies after netting short-term and long-term gains and losses together, not to each category separately. ¹ [SOURCE: IRS Schedule D instructions — Line 5]

Short-term carryover retains its character A short-term loss carried forward stays short-term in future years. This matters because short-term gains are taxed at ordinary income rates, so a short-term carryover offsets income that would otherwise be taxed at higher rates. Do not reclassify last year’s short-term carryover as long-term. ² [SOURCE: IRS Capital Loss Carryover Worksheet]

Watch out for this

Forgetting to carry forward the loss. Capital loss carryovers do not appear on any form the IRS sends you — they only exist on your prior-year return’s Capital Loss Carryover Worksheet. If you switch tax software or preparers, the carryover can easily be lost. Always check last year’s Schedule D for unused losses.

Related lines on your return

• Line 13 — Schedule D — Long-term loss carryover (same concept for long-term losses)
• Line 7 — Schedule D — Net short-term capital gain or loss
• Line 16 — Schedule D — Combines short-term and long-term results