There’s a tax law in place that limits business losses for non-corporate taxpayers, and unfortunately, this was extended by the One Big Beautiful Bill. This is how it works:
- If you incur a business loss that is greater than $313,000 ($626,000 for joint filers), then your loss is limited to those amounts.
- The loss is reported on Form 461.
- The amount above the thresholds must be carried forward to the following year as a Net Operating Loss (NOL). There is an exception for farming losses, which can be carried back.
- The NOL can only be used to offset up to 80% of your income in the following year. Any unused losses can be carried forward indefinitely.
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