Excess Business Losses Archives - Roger Rossmeisl, CPA

23 Mar 2025

If an individual taxpayer has substantial business losses, unfavorable federal income tax rules can potentially come into play. Here’s what you need to know as you assess your 2024 tax situation. Disallowance rule The tax rules can get complicated if your business or rental activity throws off a tax loss — and many do during the early years. First, the passive activity loss (PAL) rules may apply if you aren’t very involved in the business or if it’s a rental activity. The PAL rules generally only allow you to deduct passive losses to the extent you have passive income from other sources. However, you can deduct passive losses that have been disallowed in previous years (called suspended PALs) when you sell the activity or property that produced...

15 May 2023

Use the Tax Code to Make Business Losses Less Painful

Roger Rossmeisl, CPA

Small Business Tax Briefs

Use the Tax Code to Make Business Losses Less Painful

Whether you’re operating a new company or an established business, losses can happen. The federal tax code may help soften the blow by allowing businesses to apply losses to offset taxable income in future years, subject to certain limitations. Qualifying for a deduction The net operating loss (NOL) deduction addresses the tax inequities that can exist between businesses with stable income and those with fluctuating income. It essentially lets the latter average out their income and losses over the years and pay tax accordingly. You may be eligible for the NOL deduction if your deductions for the tax year are greater than your income. The loss generally must be caused by deductions related to your: Business (Schedules C and F losses, or Schedule K-1 losses from partnerships or...

22 Sep 2020

Changes to Excess Business Losses

Roger Rossmeisl, CPA

Small Business Tax Briefs

The Coronavirus Aid, Relief and Economic Security (CARES) Act made changes to excess business losses. This includes some changes that are retroactive and there may be opportunities for some businesses to file amended tax returns. If you hold an interest in a business, or may do so in the future, here is more information about the changes. Deferral of the excess business loss limits The Tax Cuts and Jobs Act (TCJA) provided that net tax losses from active businesses in excess of an inflation-adjusted $500,000 for joint filers, or an inflation-adjusted $250,000 for other covered taxpayers, are to be treated as net operating loss (NOL) carryforwards in the following tax year. The covered taxpayers are individuals, estates and trusts that own businesses directly or as partners in a...

19 Apr 2020

CARES Act’s Impact on Excess Business Losses

Roger Rossmeisl, CPA

Individual Tax Briefs

CARES Acts Impact on Excess Business Losses

Back in Blog Post #778 on 4/1/20, I summarized the Coronavirus Aid, Relief, and Economic Security (CARES) Act tax provisions. That post included a brief discussion of the CARES Act’s impact on excess business losses. Here is more about the deferral of, and changes to the limit on, excess business losses. Deferral of the excess business loss limits The Tax Cuts and Jobs Act (the 2017 Tax Law) provided that net tax losses from active businesses in excess of an inflation-adjusted $500,000 for joint filers, or an inflation-adjusted $250,000 for other covered taxpayers, are to be treated as net operating loss carryforwards in the following tax year. The covered taxpayers are individuals (or estates or trusts) that own businesses directly or as partners in a partnership or...

05 Jun 2018

(#327) TCJA Changes Some Rules for Deducting Pass-Through Business Losses

Roger Rossmeisl, CPA

Taxes

It’s not uncommon for businesses to sometimes generate tax losses. But the losses that can be deducted are limited by tax law in some situations. The Tax Cuts and Jobs Act of 2017 (TCJA) further restricts the amount of losses that sole proprietors, partners, S corporation shareholders and, typically, limited liability company (LLC) members can currently deduct — beginning in 2018. This could negatively impact owners of start-ups and businesses facing adverse conditions. Before the TCJA Under pre-TCJA law, an individual taxpayer’s business losses could usually be fully deducted in the tax year when they arose unless: The passive activity loss (PAL) rules or some other provision of tax law limited that favorable outcome, or The business loss was so large that it exceeded taxable income from...

Do You Have an Excess Business Loss?

Use the Tax Code to Make Business Losses Less Painful

Changes to Excess Business Losses

CARES Act’s Impact on Excess Business Losses

(#327) TCJA Changes Some Rules for Deducting Pass-Through Business Losses

ROGER ROSSMEISL, CPA

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