Tax loss definition
/What is a Tax Loss?
A tax loss occurs when total expenses are greater than total revenues under the tax reporting rules of the applicable government jurisdiction. A tax loss reduces an entity's tax liability only in proportion to its tax bracket.
Businesses and individuals will frequently reduce their reportable revenues or increase their reportable expenses for tax purposes in order to reduce their tax payments. Thus, an entity may report a tax loss at the same time that it reports a profit under generally accepted accounting principles or international financial reporting standards.
Tax Loss Carryforwards
A tax loss can be carried forward into a future period, where it is used to offset a tax profit in that period. This means that a tax loss is not irrevocably lost if it cannot be employed within the current year’s tax return.