Tax Loss Carryforward

AAA

DEFINITION of 'Tax Loss Carryforward'

A tax loss carryforward takes place where a business or individual reports losses on a tax return up to seven years after the loss occurred. Frequently the logic behind this is to reduce tax liability during a year where the income or profits are high if losses were experienced previously. The tax loss carryforward reduces the overall tax liability during the high-earning year by incorporating the earlier loss as a reduction to taxable income.

INVESTOPEDIA EXPLAINS 'Tax Loss Carryforward'

A tax loss carryforward is a legal means of rearranging earnings to the benefit of the taxpayer. A risk in a tax loss carryforward is that the high-earning year never comes in time to take advantage of the earlier loss.

RELATED TERMS
  1. Tax Umbrella

    The use by a company of the losses it sustained in previous years ...
  2. Accounting

    The systematic and comprehensive recording of financial transactions ...
  3. Accrual Accounting

    An accounting method that measures the performance and position ...
  4. Income Tax

    A tax that governments impose on financial income generated by ...
  5. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  6. Taxes

    An involuntary fee levied on corporations or individuals that ...
Related Articles
  1. Options & Futures

    Use Real Estate To Put Off Tax Bills

    Find out how you can build wealth and reduce your taxes.
  2. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  3. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  4. Taxes

    The History Of Taxes In The U.S.

    The number of taxes that we now consider a given did not always exist. Find out how they arose.
  5. Taxes

    How are savings bonds taxed?

    Learn who is responsible for reporting U.S. EE savings bond interest for taxation and when the interest can be reported for proper taxation.
  6. Retirement

    What are the Social Security tax caps?

    Learn how the Social Security tax cap works, what percentage of income is deducted for Social Security taxes and the history of Social Security tax changes.
  7. Credit & Loans

    Are credit card rewards considered taxable income by the IRS?

    Learn about when the Internal Revenue Service considers the financial value of gifts received from credit card reward programs to be taxable income.
  8. Credit & Loans

    7 Times It Costs More To Pay With A Credit Card

    Paying with credit cards can cost you more. Some merchants add an extra surcharge or convenience fee onto each transaction.
  9. Investing News

    Munis, Midterms And What To Watch

    There are a few things worth watching in the medterm presidential elections.
  10. Retirement

    How are Pay As You Go pension plan benefits taxed?

    Discover how the IRS treats pay-as-you-go pension plan benefits that are received as income in retirement, both for Social Security and for employer plans.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center