The recently passed CARES Act reinstates the ability for taxpayers to deduct current year losses (whether real or forced) against income from a prior tax year and receive an immediate tax refund.
This concept is called a Net Operating Loss Carryback (NOLCB). Normally when taxes are paid…they are paid. But the NOLCB allows tax payments from up to five years ago to be be refunded, due to a loss incurred in the current year.
Additionally, the CARES Act fixed a glitch. This fix now allows for Bonus Depreciation on qualifying leasehold improvements. This would notably benefit those with an office or studio the most, but there are some rather creative ways to qualify.
We encourage you to speak with your tax professional about these opportunities and others introduced with the CARES Act.
The extent to which these provisions could benefit you will depend on your business entity type, fiscal year, losses and your previous taxes paid to name a few. But we believe these are worth items to investigate.
Example of NOLCB benefits-
2020 business income – $250,000
2020 taxable income – ($100,000)
2016 taxable income – $300,000
NOLCB from 2020 – ($100,000)
Revised taxable 2016 income – $200,000
Tax Rate 2016 – 35%
Tax Refund Due $35,000
