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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14431
Experience:  15years with H & R Block. Divisional leader, Instructor
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Explain the Carryover provision for individual tax payers

Customer Question

Explain the Carryover provision for individual tax payers
Submitted: 3 years ago.
Category: Tax
Expert:  Robin D. replied 3 years ago.

Robin D :

Hello and thank you for using Just Answer,
There are many different types of carryover provisions for Individuals. Capital Loss, Charitable Contributions, Investment interest Carryover, Home Office Deduction, and the Net Operating Loss.
Each has it's own requirements and limits.
NOLs can be carried forward for up to 20 years.
There is no fixed time limit on Investment interest but, the annual deduction for investment interest cannot exceed investment income for the year.
Charitable contributions can be carried forward for 5 years. There is a special 15-year carryover rule for contributions of conservation easements.
Capital losses can be carried forward indefinitely; there is no fixed limit. However, capital losses end on death. They cannot be used by a surviving spouse beyond the joint return for the year of spouse’s death.

Robin D :

First I hope the above is in better layman's terms then you have seen in the past. Second, you may need to be more specific about your carryover if you want me to speak more directly.

JACUSTOMER-mnbumuci- :

The carryover provision was one prepared by my accountant for 20 years who retired due to illness on 12/20/2010. That meant that I had to do my taxes alone for the first time. Hence, turned to Turbo TAx which got me through. However, have had extensive deductions for church, charitble contributions and out of pocket for many years...and assumed (wrongly) that I could "carry-over" those amounts where applicable to the next tax year. IRS intervened on 2013 and asked for an accounting that I could not provide. My question emerged from that very expensive IRS experience. Help!

Robin D :

When an individual has charitable contribution carryovers, it may be advisable to defer making any more contributions until the carryover amounts have been deducted. Otherwise, they may expire without obtaining any tax benefits.
This area is complicated and that is probably why you were not informed of exactly how the carryover can apply (or not apply).

Robin D :

Contributions in excess of the annual percentage-of-Adjusted Gross Income limitations generally can be carried forward for five years (Sec. 170(d)).
BUT, current-year contributions are deducted first, then carryover contributions subject to the ordering rules and limitations. So, carryover contributions are subject to the same limits that applied (50%, 30%, special 30%, or 20%) in the year from which they are carried. If the taxpayer does not itemize in a year to which contributions are carried, the carryovers must still be reduced by the amount that would have been deductible (without considering the standard deduction) in the carryover year if deductions had been itemized (Regs. Sec. 1.170A-10(b)(2)).

Robin D :

That is why it is usually better to use up one's carried over amounts before you make any contributions in the next year.

Robin D :

The carry over rule does, unfortunately, not just mean that a taxpayer gets to add the amount from the previous year to the next and increase the amount of contribution deduction.

Robin D :

I know you said the IRS info was not easy to understand but there is not easier way to explain it then above.