(redirected from Carry Forward Losses)


In accounting, a way for a company to reduce its tax liability by applying losses to future tax years in which the company makes a profit. That is, carryforward allows companies to apply losses to profits that have not yet occurred and thereby reduce the taxes they pay on those profits. Carryforward is limited to seven years. For example, suppose a company loses $500,000 in year one, then nets $1,000,000 in year five. The company may carry forward the losses and only be liable for taxes on $500,000 of its profit in year five.

Independent contractors who file Schedule C with the IRS are required to use carryforwards, which is useful since most independent contractors lose money in their first few years of business. Some publicly-traded companies opt not to use it, as appearing to reduce profits may scare off potential investors who do not realize that the profits upon which taxes are paid do not equal the company's actual profits.


1. A business operating loss that, for tax purposes, may be claimed a certain number of years in the future, often up to 15 years. Thus, a loss in one year would be carried forward to a future year and used to offset profits up to the amount of the carryforward. Carryforwards are especially useful to firms operating in cyclical industries such as transportation. Also called tax loss carryforward.
2. In taxation of individuals, net capital losses exceeding the annual limit of $3,000 that may be carried to succeeding years so as to offset capital gains or ordinary income. There is no limit on the amount of capital losses that may be used to offset capital gains in any one year, only on the amount of losses in excess of gains that may be used to offset income. Also called carryover.
References in periodicals archive ?
I am extremely pleased to report that the Dutch tax authorities recently confirmed our Dutch tax carry forward losses post our complex reorganisation in 2002.
It provides for taxation at the flat rate of 30 per cent without any exemption, deduction, set off or carry forward losses permissible under the Income Tax Act.
The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015', that is proposed to come into effect from April 1, 2016, provides for taxation at the flat rate of 30 per cent without any exemption, deduction, set off or carry forward losses permissible under the Income Tax Act.
Despite accrued income tax charges, the utilization of carry forward losses resulted in actual tax payments of $0.
A group of investors is putting up most of the capital, and Footstar is primarily involved because it went into Chapter 11 and can carry forward losses.
Also, investors could carry forward losses and adjust them against future gains.
In contrast, Missouri law provides that a taxpayer is bound by its federal election to carry back or carry forward losses (Mo.
Thirty states and the District of Columbia do not allow NOL carrybacks but do permit taxpayers to carry forward losses to reduce future tax liabilities.
The changes on investment allowances and the ability for firms to carry forward losses are also welcome.
A disallowance of some carry forward losses may not have any impact on the taxpayer's tax liability for years to come, due to the current $3,000 limitation.
Among other requests, the association said businesses should be allowed to carry forward losses for income tax deductions for at least 10 years from the current five years.
The transaction must be a fully taxable disposition in order to take advantage of the carry forward losses.