The 2026 threshold
For tax years beginning in 2026, an individual’s net business losses above $256,000, or $512,000 on a joint return, are not deductible that year. The disallowed amount becomes part of a net operating loss carryforward.
Excess Business Loss Limit (461(l)) for 2026 | HelloBooks For 2026 the excess business loss threshold is $256,000, or $512,000 on a joint return. Which clients hit it now that 100% bonus is back.
Business returns · loss limits
The excess business loss limit for 2026
Full expensing makes big first-year losses more common, and the excess business loss rule decides how much of that loss an individual can use right away. Rev. Proc. 2025-32 sets the 2026 threshold.
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2026 threshold
$256,000
- 2026 threshold (joint)
- $512,000
- Set by
- Rev. Proc. 2025-32
- Applies to
- Non-corporate taxpayers
Applies: Tax years beginning in 2026From IRS.gov · checked October 10, 2026
Why more clients will hit it
With 100% bonus depreciation and a Section 179 limit of $2.56M for 2026, an owner who buys heavy equipment or a building component can generate a large loss in one year. Pass-through owners combine losses from all their businesses, so test the total on the 1040, not entity by entity.
Plan before buying
When a client plans a big purchase, project the year’s business income first. Electing a smaller bonus amount or spreading Section 179 may produce a better result than a loss that is pushed into a carryforward.
FAQ
Frequently asked questions
- What happens to a loss above the 461(l) threshold?
- It is not deductible in that year and carries forward as part of a net operating loss.
Related
Keep exploring
US tax changes for 2025 and 2026
The plain-English summary for business owners
Bonus depreciation is back at 100%, and Section 179 doubled
Business returns · Form 4562
The business interest limit goes back to an EBITDA base
Business returns · Form 8990
The QBI deduction after OBBBA: what changes on Form 8995
Business returns · Form 8995
Sources
General information for tax professionals, not advice on a specific return. Figures are from IRS.gov on the date shown; check the current IRS instructions before filing.
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