Are Your Business Losses Subject to the Excess Business Loss Rule?

ARTICLE | February 17, 2026

Large business or rental property losses may not provide the immediate tax relief you expect. Since 2018, the excess business loss disallowance rule has limited how much noncorporate taxpayers can deduct in a given year, pushing excess amounts into future years as net operating loss carryforwards. Now, thanks to legislation enacted in July 2025, the rule is not only permanent but also more restrictive, with lower deduction thresholds taking effect in 2026. Understanding how this rule works, how it applies to different business structures, and how the new thresholds may impact your planning is essential for business owners and investors with significant losses.

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