Modification of Limitation of Losses for Non-Corporate Taxpayers

Carrying on our tradition of providing you with Solutions Beyond the Obvious, we are pleased to bring you our “Ask the Experts” series of articles. In these articles, our Tronconi Segarra & Associates tax experts identify and explain the significant tax changes that were passed as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act which can provide additional relief for businesses and individuals facing economic hardship as the result of the coronavirus pandemic. Contact your Tronconi Segarra & Associates tax advisor for more information about any of the topics discussed in these articles.

Stefan D. Cwynar, CPA

Under the Tax Cuts and Jobs Act of 2017, a non-corporate taxpayer is not allowed to claim a deduction for excess business losses for tax years beginning after December 31, 2017, and before January 1, 2026. An excess business loss is the amount by which total deductions attributable to a taxpayer’s trades or businesses exceed the taxpayer’s total gross income and gains attributable to those trades or businesses plus $250,000 ($500,000 for married filing jointly). Any disallowed excess business loss is treated as part of the taxpayer’s net operation loss carryover to the following year.

Excess business losses can be incurred through various activities. These include activities reported on Form 1040, Schedule C, capital gains and losses from business activities, gains and losses from sales of business property, certain Form 1040, Schedule E activities (including rental income treated as business income, and pass-through activity), activities reported on Form 1040, Schedule F and the activity of being an employee.

The CARES Act has postponed the limitation on excess business losses for tax years beginning in 2018 through 2020.  This includes the postponement of excess farm loss rules as well.  For taxpayers who were subject to the excess business loss limitation in 2018, there is an option to file an amended 2018 tax return to allow the entirety of the loss and get a refund of tax dollars.

Please contact your Tronconi Segarra & Associates tax advisor for more information on this or any tax matter. If you do not have a Tronconi Segarra & Associates tax advisor, please call 716.633.1373 or Contact Us through our website with your question.



This article has been prepared for general guidance on matters of interest only; it does not constitute professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy of completeness of the information contained in this article; and, to the extent permitted by law, Tronconi Segarra & Associates LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.


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