Loss carryover - sustany/dvg GitHub Wiki

A loss carryover, or loss carryforward, means that a taxpayer carries over a tax loss to future years to offset a profit. When the capital gain is smaller than the capital loss in a tax year, or the expenses are greater than the revenue in a tax year, the taxpayer suffers a loss (see 26 USC �1211 for more details of capital losses). Under �165 of the Internal Revenue Code (26 USC �165), losses can be allowed as a deduction with limitations. When a loss is greater than the amount allowed by the tax deduction, it can be carried to the following years. This creates a future tax relief, which essentially increased the income of a future year.

Different types of loss can be carried over for different number of years. For example, net operating loss can be carried forward for 20 years (to a year which has profit). Most states also have their own rules regulating the available period for carryover.

Only realized loss (26 USC �1001(b)) can be carried forward. This means even if a property loses its market value, if the taxpayer did not sell the property and realize the loss, the loss cannot be carried over.