Carry Forward Losses

Carry forward losses refer to the practice where businesses or individuals can apply a net operating loss from one year to future years to reduce taxable income. If a company spends more than it earns in a year, creating a loss, it can carry that loss forward to offset profits in subsequent years, thereby lowering future tax liabilities. This policy helps smooth tax burdens over time, especially for startups or businesses with fluctuating earnings. The specific rules and time limits for carrying losses forward vary depending on tax laws in each jurisdiction.