Updated October 18, 2026. Quick answer: Line 21 applies only if line 16 is a loss. You enter the smaller of the loss on line 16 or the $3,000 limit printed on the form ($1,500 if married filing separately), and any larger loss may carry over. Line 22 asks whether you have qualified dividends on Form 1040 line 3a, which decides whether you finish with the Qualified Dividends and Capital Gain Tax Worksheet.
IRS worksheets read line by line: Capital Loss Carryover Worksheet.
Line 21: the capital loss limit
The form says: “If line 16 is a loss, enter here and on Form 1040, 1040-SR, or 1040-NR, line 7a, the smaller of:” “The loss on line 16; or” “($3,000), or if married filing separately, ($1,500)” “Note: When figuring which amount is smaller, treat both amounts as positive numbers.”
The instructions give the general rule: “deduct capital losses up to the amount of your capital gains plus $3,000 ($1,500 if married filing separately).” “Be sure to report all of your capital gains and losses even if you can’t use all of your losses in 2025.”
An illustration of line 21
Illustration, not an IRS example: suppose line 16 is a loss of $5,000. Treating both as positive numbers, the smaller of $5,000 and $3,000 is $3,000, so $3,000 is the amount the form tells you to enter on line 21. The loss on line 16 is then more than the loss on line 21, which is the first of the two tests the instructions give for a carryover.
When a loss carries over to 2026
The instructions say you “have a capital loss carryover from 2025 to 2026 if you have a loss on line 16 and either:” “That loss is more than the loss on line 21; or” “The amount on Form 1040, 1040-SR, or 1040-NR, line 15, would be less than zero if you could enter a negative amount on that line.”
The calculation is not done on this year’s form: “figure any capital loss carryover to 2026, you will use the Capital Loss Carryover Worksheet in the 2026 Instructions for Schedule D.” Next year’s amount appears on the line 14 and line 6 entries of the next return; the lines 13 to 15 page explains line 14. For a planning view of offsetting gains, see the capital loss harvest helper.
Line 22: qualified dividends
Line 22 asks “Do you have qualified dividends on Form 1040, 1040-SR, or 1040-NR, line 3a?” “Yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 16.” “No. Complete the rest of Form 1040, 1040-SR, or 1040-NR.” See the Qualified Dividends and Capital Gain Tax Worksheet page for that worksheet and Form 1099-DIV boxes 1a and 1b for where qualified dividends are reported.
When you skip lines 21 and 22
Line 21 is for the loss path from line 16, while line 22 is reached from the loss path, the zero path and a No answer on line 17. If you reached line 20 on a gain, the form tells you “Don’t complete lines 21 and 22 below.” The line 20 page covers that choice, and the lines 16 and 17 page covers how line 16 routes you.
Where the number comes from
Line 21 comes from line 16, compared with the limit printed on the form for your filing status. Line 22 is a yes or no answer taken from Form 1040 line 3a. See Schedule D (Form 1040) for the whole schedule.
Where it goes next
The line 21 amount is entered “here and on Form 1040, 1040-SR, or 1040-NR, line 7a”. The Form 1040 line 7 page shows how that entry flows into your total income. Line 22 sends you to the tax worksheet or to the rest of Form 1040.
Edition and line numbers
This page reads the 2025 Schedule D (Form 1040) and its 2025 instructions, the current files irs.gov served on 2026-10-18 (byte-identical to the archived copies). They are the files for the tax year 2025 return, filed in 2026. The schedule says “Attach to Form 1040, 1040-SR, or 1040-NR.” Check the tax year printed on the schedule you are filling in and use the line numbers on that year’s schedule, because a different year’s schedule can number or word its lines differently.
Common mistakes
- Entering the whole loss on line 21. The form asks for “the smaller of:” the loss on line 16 or the printed limit, and says to treat both amounts as positive numbers.
- Forgetting that a married filing separately return has a different limit. The caption says “($3,000), or if married filing separately, ($1,500)”
- Skipping line 22 after a loss. The form says “Also be sure to complete line 22.”
Related: Schedule D (Form 1040), the capital loss harvest helper, Qualified Dividends and Capital Gain Tax Worksheet page, and Form 1040 line 7 page.
Sources
- Instructions for Schedule D (Form 1040), Capital Gains and Losses (2025): https://www.irs.gov/pub/irs-pdf/i1040sd.pdf
- Schedule D (Form 1040), Capital Gains and Losses (2025): https://www.irs.gov/pub/irs-pdf/f1040sd.pdf
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.