Tax Reform Series 31 – Limit on Excess Business Losses for Noncorporate Taxpayers


Plain Language of Change:

  • Excess business losses of noncorporate taxpayers are not allowed for tax years beginning after December 31, 2017, and before January 1, 2026
  • Any excess business loss that is disallowed is treated as a net operating loss (NOL) carryover to the following tax year
  • An “excess business loss” is the excess, if any, of:
    • the taxpayer’s aggregate deductions for the tax year from the taxpayer’s trades or businesses, determined without regard to whether or not such deductions are disallowed for such tax year under the excess business loss limitation; over
    • the sum of:
      • the taxpayer’s aggregate gross income or gain for the tax year from such trades or businesses, plus
      • $250,000, adjusted for inflation (200 percent of the $250,000 amount in the case of a joint return)
  • For losses arising in tax years beginning after December 31, 2017, an NOL may only reduce 80 percent of taxable income in a carryback or carryforward tax year. 
  • For partnerships and S corporations, the limit on excess business losses is applied at the partner or shareholder level

Detailed Analysis of Limit on Excess Business Losses for Noncorporate Taxpayers

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