The purpose of the "excess business loss" rules are to limit the amount of non-business income (e.g., salaries, interest, dividends, etc.) that can be "sheltered" from tax as a result of business losses.

Question

Quizplus · Accepted Answer

The "excess business loss" rules were introduced as part of the Tax Cuts and Jobs Act (TCJA) in 2017 and are designed to prevent taxpayers from using business losses to offset non-business income and reduce their tax liability. The rules apply to non-corporate taxpayers, such as individuals, trusts, and estates, and limit the amount of business losses that can be deducted in a given year. Any excess business losses are carried forward and treated as a net operating loss (NOL) that can be used to offset future business income.

The Purpose of the "Excess Business Loss" Rules Are to Limit