A big change is here for noncorporate taxpayers, including sole proprietors, partners in partnerships, members of LLCs taxed as partnerships and S corporation shareholders. Losses from these entities flow through to the owners and generally can offset income from other sources (such as salary, interest, dividends and capital gains) only up to the applicable excess business loss limit. For 2026, these limits have dropped to $256,000 for single filers and $512,000 for joint filers (from $313,000 and $626,000, respectively, for 2025), increasing the likelihood that part of a large loss won’t be deductible right away. Instead, excess losses must be carried forward. Contact us for guidance.
