Excess Business Loss Limits
If you’re a self-employed contractor, consultant, or realtor who took a major business loss this year, you may be surprised to learn that you can’t always deduct the whole thing on your taxes. A rule called the Excess Business Loss Disallowance might limit how much of that loss you can write off—at least this year.
What’s an Excess Business Loss?
It’s when your total business losses go over a certain IRS threshold. For the 2025 tax year:
- Single filers can deduct up to $313,000
- Married joint filers can deduct up to $626,000
Any amount above that gets classified as a Net Operating Loss (NOL)—and you can’t use it right away. Instead, you carry it forward to future tax years where it can offset up to 80% of your income. In short: you’ll get some benefit, just not right now.
What’s the IRS Trying to Prevent?
The government created this rule to stop people from using massive business losses to wipe out their personal income from things like:
- W-2 salary
- Investment income
- Capital gains
It’s part of a bigger effort to close tax “loopholes” and spread out deductions across multiple years.
Who Does This Affect?
This rule hits hardest if you:
- Had a really bad year in business
- Have other high-income sources (like investments, spouse’s salary, or trust income)
- Own rental properties or passive income sources
You also still have to get past the Passive Activity Loss (PAL) rules first. Those may block your deductions before this even comes into play—especially if you’re not hands-on in the business.
What Should You Do?
If you think you’re going to hit that limit, you’ll want to plan ahead. At Ken-Mar Tax, we help clients:
- Spot where losses are disallowed
- Maximize deductions across future years
- Understand what they can and can’t deduct now
Not sure if you’re over the limit?
Schedule a Consultation to review your 2024 or 2025 business returns and protect your income from surprises.
Related Blog Posts:
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Attention Real Estate Professionals: Are You Paying Too Much in Taxes?
Tax Strategies to Increase Profits on Real Estate Investments and Rentals
Contact Us
If you’ve been frustrated dealing with the IRS, or you just don’t want to deal with the IRS, contact Ken Weinberg to explain your situation and find out what Ken-Mar Tax would charge to handle your situation and avoid dealing with the IRS all together.
- If you have back taxes and want to know the timeline and/or costs to get your back taxes resolved
- If you own a small business and want to discuss tax reduction strategies for the self-employed
- If you’re worried your last tax expert wasn’t doing the best they could have and want a second opinion…
Contact Ken Weinberg to learn more about our small business tax consultant services and set up a free consultation by filling out the form on this page.
