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Simple English definitions for legal terms
tax-loss carryback
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A quick definition of tax-loss carryback:
A tax-loss carryback is a way for businesses to deduct losses from their income taxes. If a business has a net operating loss in a given year, they may not be able to use the entire deduction in that year. However, they can carry back the deduction to a previous year (usually up to three years) to reduce their tax liability for that year. This is also known as a loss carryback and can help businesses recover some of the taxes they paid in previous years.
A more thorough explanation:
Tax-loss carryback is a deduction in income tax that cannot be fully used in a particular year but can be carried back to an earlier year, usually the previous three years. It is also known as loss carryback or tax-loss carryback.
Let's say a company has a net operating loss of $50,000 in the current year. The company can use this loss to offset its taxable income in the previous three years and get a refund for the taxes paid in those years. For example, if the company paid $10,000 in taxes in the previous year, it can carry back the $50,000 loss and get a refund of $10,000.
This deduction is helpful for businesses that have experienced a loss in a particular year and want to reduce their tax liability. It allows them to get a refund for the taxes paid in the previous years and improve their cash flow.