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In 2019, John is single and is the owner of a proprietorship with $650,000 of gross...

In 2019, John is single and is the owner of a proprietorship with $650,000 of gross income and $975,000 of deductions, resulting in a $325,000 loss for the year. How much of this loss can John deduct in 2019 and what does he do with the excess loss?

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Answer #1

An excess loss is "the amount by which the total deductions from all trades or businesses exceed a taxpayer’s total gross income and gains from those trades or businesses, plus $250,000, or $500,000 for a joint return."

Now in the present case John (a single taxpayer) has a business loss for the year of $325,000. This amount is greater than the $250,000 limit, so he can only take $250,000 of loss on this year's return, leaving $75,000 of loss that he might be able to carry forward to the next tax year.

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