Also found in: Dictionary, Thesaurus, Legal.


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 ?
Lastly, in Spain, the NOL carryforward period has been extended from 15 to 18 years.
Each year the company must estimate the extent to which the future benefit of the loss carryforward is more likely than not to be lost and adjust its valuation allowance accordingly.
172(b)(1)(H) election is made, Y will have an AMT liability of $12,000 for 2010, an NOL carryforward of $3 million, and an ATNOL carryforward of $3.
331, the Workers Incentives Improvement Act) to shorten the FTC carryback from two years to one and expand the carryforward from five years to seven.
Thus, L reports no taxable income and has a $10 NOL carryforward.
3) Unlike the SRLY rules, which apply to both carryforwards and carrybacks of losses and credits, sections 382 and 383 address only carryforwards.
Assuming a 15-year carryforward period, even marginal expected future taxable income would justify recognition of the entire deferred tax asset.
Under section 1062 of the House bill and section 872 of the Senate bill, the net operating loss carryover periods would be revised, decreasing the carryback period to 2 years while increasing the carryforward period to 20 years.
In addition, if corporations acquire assets to avoid net recognized built-in gains and the resulting tax, the asset and any loss, deduction or carryforward will be disregarded.
If the gain is capital gain, Larry can offset it with a capital loss carryforward.
The Administration's proposal would reduce the carryback to 1 year, and expand the carryforward period to 20 years,
No taxes were recorded for the second quarter of fiscal year 1994 because of an existing net operating loss carryforward.