Tax Loss Carryover

About Tax Loss Carryover:

Tax Loss Carryback (or Tax Loss carryover) is a tax benefit that allows a taxpayer to use losses from 1 year to reduce tax liability in another year. A taxpayer may carry a net operating loss back to the 3 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 15 years.

A corporation may carry a net capital loss back for 3 years, then carry over any remaining losses for 5 years. The capital losses may offset capital gains only, and not operating income. The carryover is treated as a short-term capital loss and may not increase a net operating loss in the carryback year.

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.

See also Capital Gain in the American Legal Encyclopedia and Capital Gain in the World Legal Encyclopedia.