Carryforward

Carryforward is a term used in accounting and taxation to describe the ability to apply amounts from one period to later periods in order to offset income or tax liabilities.

In tax terms, a loss carryforward lets a company or individual use a current year's net operating loss (NOL) to reduce taxable income in future years. The rules vary by jurisdiction and may limit the amount that can be offset each year or cap the total carryforward period. Some regimes allow indefinite carryforward; others set expiration dates or phase out benefits as profits rise. Tax credits can likewise be carried forward when they are not fully used in the current year, with rules about expiration, annual limits, and interactions with other tax provisions.

Carryback and carryforward describe opposite directions. Carryback offsets past tax years and is not available everywhere. Carryforward is more common and often the default mechanism for preserving tax relief or credits when current period income exceeds the amount eligible for relief.

In financial reporting, losses and certain tax credits may be recognized as deferred tax assets when it is more likely than not that benefits will be realized in future periods. Carryforward assets require ongoing assessment for recoverability and may be adjusted if profitability prospects change.

Outside taxation, carryforward can refer to unspent budgeted funds or project resources that are rolled into the next period to improve flexibility in planning.