Will a capital gain that is offset by capital loss carryforwards count toward my adjusted gross income (AGI)?

by Harold P. Eck, CPA | Sep 20, 2018

I have capital loss carryforwards, both long and short term. If I have a capital gain this year (only a small portion of the total carryforwards), I know that I will not have taxes due on those gains. But I have an Affordable Care Act tax credit. Will the nontaxable capital gain still count toward my AGI for calculating my subsidy from the marketplace? If it does, it is not worth realizing the gain because I am just under the 400 percent federal poverty level, and that would trigger a balance due for my full subsidy. Unless this would not count toward my AGI.

The short answer to the question is good news: recognizing a capital gain in 2018 that is offset by capital losses will not increase modified AGI for purposes of the Excess Advance Premium Tax Credit.

The definition of modified AGI for this purpose is your AGI on the tax return, plus foreign-earned income, tax-exempt interest, and untaxed Social Security benefits.

Either way, make sure to deduct $3,000 in capital loss carryforwards in addition to any amount used to offset capital gains.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Harold P. Eck, CPA, is an individual practitioner in Jersey Shore, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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