In this clip, we break down one of the most crucial but often overlooked aspects of tax planning for business owners: the Excess Business Loss (EBL) limitation. For 2025, this rule is permanently written into the tax code, and it’s something every high earner and business owner should know.
What many people don’t realize is that the IRS has set a ceiling on the amount of business losses you can use to offset your income. The 2025 threshold is $313,000 for single filers and $626,000 for married couples filing jointly. Any losses exceeding these thresholds are carried forward as Net Operating Losses (NOL), but even then, you can only offset 80% of your income, which means you can’t just wipe out your tax bill with a huge loss.
This limitation is critical to understand because it impacts how you can plan your taxes, especially if you’re relying on large business losses to lower your tax liability. The takeaway here is that it’s nearly impossible to reach a zero tax bill with these limitations in place.
Planning ahead with the right strategies and understanding these limitations can help you avoid the frustration of discovering them too late. If you’re serious about minimizing your tax burden, proactive tax planning with a knowledgeable CPA is essential.
