Legal Definitions - tax-loss carryover

Tax-loss carryover is a deduction in income tax that cannot be fully used in a particular year but can be carried over to the next five years. It is also known as loss carryover, carryforward, loss carryforward, or tax-loss carryforward.

For example, if a business incurs a net operating loss of $50,000 in a particular year and its taxable income is zero, it can carry over the $50,000 loss to the next year. In the next year, if the business has a taxable income of $70,000, it can deduct the $50,000 loss carryover from its taxable income, resulting in a taxable income of $20,000.

Tax-loss carryover is beneficial for businesses that experience losses in a particular year as it allows them to offset their future taxable income and reduce their tax liability.