Under the CARES Act, the limitation on the deduction of excess business losses for noncorporate taxpayers will not apply for tax years beginning in 2018, 2019 and 2020.An “excess business loss” is the excess of a taxpayer’s aggregate deductions for the tax year from its trades or businesses over the aggregate gross income or gain for the tax year from those trades or businesses plus $250,000 ($500,000 for joint return filers). Under the Tax Cuts and Jobs Act, a noncorporate 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. However, the CARES Act now modifies the deduction limitation to apply for tax years beginning after December 31, 2020 and before January 1, 2026.
Because the limitation on excess business losses no longer applies to the 2018 tax year, taxpayers who were subject to the limitation for 2018 have an opportunity to file an amended return and claim a potential refund.
The modification to the loss limitation for shareholders and partners of pass-through businesses and sole proprietors, will help noncorporate taxpayers utilize business losses and improve their cashflow. Please call our office to determine if you will benefit by filing an amended return. We are here to assist you.