The Tax Cuts and Jobs Act put a new limit on deductible business losses incurred by non-corporate taxpayers.
Losses from a trade or business are now limited to $250,000, or $500,000 for a joint return.
A trade or business includes, but is not limited to:
- Schedule C and Schedule F activities
- being an employee
- certain activities reported on Schedule E
Excess losses that are no longer allowed are treated as a net operating loss and carried forward to the following taxable year. For information on how these rules apply to farmers, see the Farmer’s Tax Guide.