Carryback

Carryback is a tax provision that allows a taxpayer to apply a loss, credit, or other tax attribute to a prior tax year. By doing so, the taxpayer may receive a refund of taxes already paid or reduce tax liability in that earlier year. Carryback is the opposite of carryforward, where the benefit is applied to future years. Carrybacks are most commonly associated with net operating losses (NOLs) and certain tax credits, though the availability and rules vary by jurisdiction and by the type of loss or credit.

Mechanics and scope can differ, but the general idea is that a taxpayer elects to apply an eligible loss or credit to one or more preceding filing years, potentially requiring amended returns for those years. The amount carried back is typically capped and subject to time limits; unused portions may then be carried forward under the applicable rules. Some regimes restrict carrybacks to specific kinds of losses or credits and limit how far back they can go.

Notable variations exist by country and tax regime. In the United States, for example, net operating losses and their carryback/carryforward treatment have been altered by recent legislation. The Tax Cuts and Jobs Act generally moved toward indefinite NOL carryforwards with an 80% of taxable income limitation, while temporary measures under the CARES Act allowed NOLs arising in 2018–2020 to be carried back five years and to offset 100% of taxable income (these provisions were temporary). Other jurisdictions also provide carryback rules, often with different periods and limits.

Taxpayers should consult current local law or a tax professional, as carryback rules can be complex and time-sensitive.