Legal Definitions - tax-loss carryback

Tax-loss carryback is a deduction in income tax that cannot be fully used in a particular year but can be carried back to an earlier year, usually the previous three years. It is also known as loss carryback or tax-loss carryback.

Let's say a company has a net operating loss of $50,000 in the current year. The company can use this loss to offset its taxable income in the previous three years and get a refund for the taxes paid in those years. For example, if the company paid $10,000 in taxes in the previous year, it can carry back the $50,000 loss and get a refund of $10,000.

This deduction is helpful for businesses that have experienced a loss in a particular year and want to reduce their tax liability. It allows them to get a refund for the taxes paid in the previous years and improve their cash flow.