Written by:
Image
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated August 12, 2020

What is Loss Carryback?

The term "loss carryback" is where a company retroactively chooses to apply the net operating loss in the current year to the previous profitable year(s) to obtain a tax refund for monies already remitted or incurred on the profits earned in those years.

How Does Loss Carryback Work?

For example, if a company has a net operating loss in the current year of $2,000,000, it can carry that backward to the previous year to offset its net operating income of $2,000,000. The company would then have a zero tax liability ($2,000,000 less $2,000,000). At this point, the company could apply for a refund for the tax it paid on the original $2,000,000 if they have already remitted it.
 
For an individual or a company, the carryback period is 3 years.

Why Does Loss Carryback Matter?

A company which happens to find itself in a loss position for a particular year has at its disposal a tool that it can utilize to offset past profitable financial results. This is a situation where corporate or individual tax planning can be used retroactively.

By the same token, the company or individual can use this principle in their future tax planning when they anticipate they will have a loss in future years.

Ask an Expert about Loss Carryback
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Loss Carryback.
Be the first to ask a question

If you have a question about Loss Carryback, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Loss Carryback, then please ask Paul.

Ask a question Read more from Paul

Read this next

Don't Know a Financial Term?
Search our library of 4,000+ terms
Paul Tracy - profile
Ask an Expert about Loss Carryback

By submitting this form you agree with our Privacy Policy

Share
close