Tax Umbrella

Definition of 'Tax Umbrella'


The use by a company of the losses it sustained in previous years to offset taxes on the profits it achieves in future years. Individuals can also use a tax umbrella so that their investment losses in previous years offset their investment gains in future years. A tax umbrella takes advantage of a tax law provision to reduce tax liability.

Investopedia explains 'Tax Umbrella'


Businesses and individuals are limited in how much of a loss they can use to offset taxes in any given year. Any loss that is left over can be used to offset taxes on gains in future years. A tax umbrella is also known as a tax loss carryforward.


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