OBBB Act: Excess Business Loss Limitation
- TOPC Potentia
- Dec 11, 2025
- 2 min read
Updated: Dec 23, 2025
December 11, 2025
On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law. The OBBB Act includes a number of tax changes affecting individuals and businesses. Under the OBBB Act, the limitation on the excess business loss of a noncorporate taxpayer is made permanent.
Background
A noncorporate taxpayer may not deduct excess business losses. Instead they must treat any excess business loss that is disallowed as a net operating loss (NOL) carryover to the following tax year. The excess business loss limitation was enacted under the Tax Cuts and Jobs Act for tax years starting after 2017, but was postponed to tax years beginning after 2020 by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in response to the COVID-19 crisis. It was later extended until 2029 by the Inflation Reduction Act of 2022.
An excess business loss is the excess, if any, of:
the taxpayer’s aggregate deductions for the tax year from the taxpayer’s trades or businesses, determined without regard to whether or not such deductions are disallowed for such tax year under the excess business loss limitation; over—
the sum of (1) the taxpayer’s aggregate gross income or gain for the tax year from such trades or businesses, plus (2) an inflation-adjusted amount ($626,000 if married filing jointly and $313,000 for other filers for 2025)
New Law Explained
The limitation for excess business loss of a noncorporate taxpayer is made permanent under the OBBB Act. A noncorporate taxpayer is not allowed to claim a deduction for any excess business losses in any tax year.
In addition, the inflation adjustment for the dollar amount for determining a noncoporate taxpayer‘s excess business loss is modified to use 2024 as the indexing year for this purpose (instead of 2017) effective for tax years beginning after December 31, 2025.
Please refer to the URL below for further details.
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