Excess Business Losses Under The One Big Beautiful Bill

On July 4, 2025, President Trump signed the One Big Beautiful Bill into law. The legislation makes far-reaching changes to the federal tax code and other parts of the government. The bill cuts certain taxes, changes funding for federal programs, and raises the debt ceiling by $5 trillion.

Understanding the Tax Cuts and Jobs Act (TCJA) extensions is critical. The One Big Beautiful Bill extends many provisions originally introduced in 2017. This affects small business owners, tax advisors, and anyone dealing with business losses and taxes.

What Are Excess Business Losses?

Under current tax law, business owners face limits on excess business loss deductions. Total losses from businesses that can offset other income are limited. The excess business loss limitation 2025 is set at $250,000 for single filers. Married couples filing jointly face a limit of $500,000.

What is excess business loss limitation? It’s a cap on how much business loss a taxpayer can use to offset other income in a single taxable year. Any losses exceeding the limit become net operating loss carryovers. These are available for use in the following year.

Understanding excess business loss limitation and how to calculate excess business loss is essential for small business owners. Tax advisors help clients navigate these rules and minimize tax liability.

How The One Big Beautiful Bill Changes Excess Business Loss Rules

Congress originally scheduled the excess business losses provisions to expire after 2028. The rules would have ended at that time. However, the One Big Beautiful Bill makes the excess loss provisions permanent. This is a significant change for business owners planning long-term tax strategies.

When Excess Business Loss Limitations Benefit Taxpayers

It’s important to recognize that these limitations sometimes benefit taxpayers. This may seem counterintuitive, but the math supports it.

Without the limitation, a large business loss could offset all of a taxpayer’s income in a given year. This includes income taxed at low income tax rates. Taxpayers might pay 0% tax on some income.

The excess business loss limitations change this. They preserve the loss for use in a different year. This can reduce overall tax liability across multiple years.

Your tax advisor can help you estimate how these provisions affect your tax liability. They can model scenarios across different taxable years to optimize your position.

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With major changes to tax rules, both individuals and business owners should revisit tax strategies. The permanent status of excess business loss limitations requires careful planning. A proactive approach is essential to capture benefits, manage risk, and stay compliant as provisions take effect.

Understanding excess business losses, net operating loss carryovers, and how these rules affect your tax liability is critical. Whether you’re a small business owner, sole proprietor, or high-income professional, expert guidance helps optimize your tax position.

Do you have questions about these tax rules or any other issue? Reach out – WhippleWood CPAs are here to help. For additional information, please call 303-989-7600. We look forward to speaking with you soon.