What is a Tax Loss Carryforward?
A tax loss carryforward is a technique used in accounting, which can allow you to report losses up to seven years after they occur (in most cases) to minimize paying taxes in a year when a company or an individual has had a high profit. Sometimes the tax loss carryforward occurs naturally as a result of limits on the amount of loss that can be deducted in a certain year. People or businesses then carry forward the amount above that limit to the next year to reduce overall tax payments. At other times, when tax amounts are low, part or all of losses may be deducted in a year when someone or some business makes more profit. Use of the tax loss carryforward is legal, though critics of a tax system sometimes scrutinize its use. “Saving” a huge loss year to mitigate taxation on huge profits in a subsequent year may significantly lower payments in the year that the tax loss carryforward is used. There are some drawbacks to saving loss amounts, though. A person wanting to employ this method i
