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Categories: General Tax Terms

Carryforward

A carryforward refers to a tax provision that allows a taxpayer to apply an unused portion of a tax attribute (such as a tax credit, net operating loss, or capital loss) to a future tax period. This mechanism is used to offset future taxable income or tax liability.

For example, if a business incurs a net operating loss of $10,000 in one tax year, it may carry forward that loss to offset taxable income in subsequent years, reducing future tax obligations. The specific rules regarding how long a carryforward can be utilized and the types of attributes eligible for carryforward vary by jurisdiction and type of tax.

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