Betting on losses to offset other taxable Income?

Here is why may not  work for you!

The tax reform of the Tax Cuts and Jobs Act (TCJA) has introduced an astonishing threshold to larger business losses that can actually attack your cash flow, ouch!

So, this new law apparently works in some bizarre ways, even though you don’t have a real income for the year. Then you really have some planning opportunities to mitigate the problem when you know precisely how this hideous new rule actually does work.

Your Elected Officials have decided to introduce laws over the years that severely limits your opportunities to counter your business or lease losses to other sources of income. 

Here are the most common  that I have been hearing in all my continuing education workshops:

1. Limitations that are, in accordance with IRC § 465, the taxpayer's loss deductions are limited to "at risk "amounts in trade or business or income-producing activities.
2. Limitations on the basis of partnership and S corporation, which limit your losses to the extent of your interest in the partnership or stock of S corporation
3. Limitation on passive loss, which severely limits your passive losses up to your passive income unless an exception applies.

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In other words,  this relatively new policy is that in the current year, which the new law considers to be an "excess business loss, "you simply cannot use your business loss. "Instead, the excess business loss will be treated as a net operating loss (NOL) for the next taxable year.

To avoid becoming a victim of this new TCJA new rules you need to implement these two strategies:

1. accelerating business income, and
2.  delaying business deductions