Tax Loss Carryback, Carryforward

Tax benefit that allows a company or individual to apply losses to reduce tax liability. A company may Offset the current year's Net Operating Losses against profits in the two immediately preceding years, with the earliest year first. After the carryback, it may carry forward (also called a carryover) net operating losses up to 20 years. By then it will presumably have regained financial health.

Individuals may carry over capital losses until they are used up for an unlimited number of years to offset capital gains. Unlike corporations, however, individuals generally cannot carry back losses to apply to prior years' tax returns. Capital losses left over beyond capital gains earned in one year can be used to reduce taxable income up to $3,000 per year.