Which business is best without loss

How to use the loss carryforward for tax purposes


If you make a loss from one type of income in one year, you can partially offset this loss against other positive income in the same year in a tax-saving manner. If you have no offsettable income this year, you are spoiled for choice. You can apply for a loss carryforward or a loss carryforward in your income tax return.


In the following, we will highlight the special tax aspects of loss carryforwards for you.


Loss carryforward: These are the tax rules

If you achieve losses in one year from an income type that is not offset against positive income from the current year or from positive income from the previous year, the tax office will record the losses in an extra tax assessment, the so-called Loss assessment notice, set. This enables a loss carryforward. That means that the Losses with positive income can be offset against taxthat are in the Subsequent years be achieved.


Tip: The loss can be carried forward indefinitely, but not in terms of amount. According to Section 10d (2) EStG, the loss carryforward is possible without restriction up to a total amount of income of EUR 1 million, and up to 60 percent of the total amount of income exceeding EUR 1 million.

In the case of jointly assessed spouses or partners in a registered civil partnership, the unrestricted maximum amount that can be offset increases to 2 million euros.


Typical cases from practice

Loss carryforward in the event of unemployment

Were you unemployed and have received no wages throughout the year, but had their own expenses for further training or retraining or for applications, you should present these expenses to the tax office in Appendix N to the income tax return despite a lack of income. Consequence: The tax office determines the losses in the loss assessment notice and you have them Possibility to carry out a loss carryforward. The losses can be offset against wages or profit income in later years.


Loss carryforward for students

A loss carryforward makes sense for students, as they usually have more expenses for their studies than income. The expenses include, for example, the semester fee and possibly tuition fees, a second home at the place of study or travel expenses as well as expenses for specialist literature, writing materials, computers, etc.


Danger: According to a decision by the Federal Constitutional Court, expenses for the First degree and first apprenticeship should not be regarded as income-related expenses. They are considered Special editions and are therefore limited to 6,000 euros per year. In addition, special expenses only have a tax effect if there is also taxable income in the same year. Bachelor-Students have bad cards.

It looks different with one Master's degree off: The special expenditure regulation does not apply to them. Your study expenses are counted as training costs and are indefinitely deductible as business expenses. Master’s students can make a loss carryforward.


Limits on loss carryforward

Unfortunately, not all losses from different types of income can be offset against each other in a tax-saving manner by means of loss carry-back. In particular, in the case of the following losses, tax restrictions apply to loss offsetting and loss carryforwards:

  • Losses from capital assets: Losses from capital assets can only be offset against profits from capital assets in a tax-saving manner by means of loss carryforwards. Offsetting against income from wages or from commercial operations or from freelance work is not permitted.
  • Losses from private sales: If you generate losses from a private sale transaction (speculative transaction) in one year, you can apply for a loss carryforward. However, offsetting is only possible with future profits from private sales transactions.


Where do I apply for the loss carryforward?

Since the 2019 tax year, the loss carryforward has been in the "Other system" in line 7 to apply. In the tax years up to and including 2018, you had to enter the information on the loss carryforward on the last page of the four-page cover sheet for the income tax return.