Excess Business Loss Limitation Needs More Clarity, Tax Pros Say

Questions linger about the application of the excess business loss limitation, tax pros say, with one claiming a Biden administration budget provision “could fundamentally change how people own and invest in businesses that generate losses.”

The excess business loss limitation under Section 461(l), in effect again for the 2021 tax year after a previous repeal, applies to taxpayers who operate a business that is not a C corporation, such as pass-through entities.

If the taxpayer incurs a business-related loss in 2021 of more than $262,000 for an individual, or $524,000 for married taxpayers filing jointly, the part of that ...