# What This Bill Does

This bill creates a tax break for individuals who lose money in their business or investments. Here's the situation: under current tax law, when you have a business loss in one year, you can use that loss to reduce your taxes in future years. However, there's a limit—you can only use up to 80 percent of your income in future years to offset these losses. This bill says that if you're an individual (not a corporation or trust) and your income is $400,000 or less, you don't have to follow that 80 percent limit.

To understand why this matters, imagine you own a small business that loses $100,000 in 2021. Normally, if you make $50,000 in 2022, you could only use 80 percent of that income ($40,000) to offset your loss, leaving you with $10,000 in taxable income. Under this bill, if your income stays under $400,000, you could use the full $50,000 against your loss instead. Essentially, you'd owe less in taxes because you can use more of your business loss to reduce your tax bill.

The bill applies to tax years starting after December 31, 2020, so it would affect your 2021 taxes and beyond. This primarily helps small business owners, self-employed people, and investors who experience losses—allowing them to get more immediate tax relief rather than having to spread their deductions out over multiple years. The $400,000 income threshold means this benefit is aimed at individuals and small business owners rather than high-income earners.

To amend the Internal Revenue Code of 1986 to except certain individuals from the 80 percent taxable income limitation on net operating loss carryovers.

Newman, Marie

 <p>This bill exempts taxpayers whose modified adjusted gross income does not exceed $400,000 in a taxable year from the 80% taxable income limit on net operating loss carryovers.</p>