Dictionary of Business Terms: tax loss carryback or carryover
tax loss carryback or carryover
tax benefit that allows a taxpayer to use losses from one year to reduce tax liability in another year. A taxpayer may carry a Net Operating Loss back to the two immediately preceding years for the purpose of obtaining a refund of taxes previously paid. After applying the carryback, a net operating loss may be carried forward up to 20 years.
An individual may not carry back a capital loss but may carry it over to offset future capital gains and to reduce ordinary income by up to $3,000 annually until the loss is exhausted.
