Refund Opportunities for Excess Business Losses

August 10, 2020

The Tax Cuts and Jobs Act (TCJA) limited the ability of noncorporate taxpayers — such as sole proprietors, partnerships and S corporations — to offset business losses against income from other sources. For 2018 through 2025, the TCJA limits deductions of “net business losses” to $250,000 ($500,000 for joint filers), adjusted for inflation. Disallowed losses may be carried forward to future tax years according to net operating loss (NOL) rules.

This year’s Coronavirus Aid, Relief and Economic Security (CARES) Act suspended these limits for 2018 through 2020, making business losses fully deductible in those years. If your losses were reduced on your 2018 or 2019 tax returns, you may have an opportunity to amend those returns and claim a refund of overpaid taxes during those years.

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