What if income from benefits is negative?
Negative income or losses from benefits can be offset against profits from similar income in the same year. However, it must be clear that there is a fundamental possibility of achieving a surplus with the benefits. Otherwise, the losses will not be recognised, and the income will not be taxable.
Loss offset: carry back and carry forward
If your income from benefits is negative, you can carry back the losses to the previous year and offset them against profits made there. Alternatively, you can carry forward the loss to the following year and offset it against future surpluses. This reduces your taxable income in the respective year.
Regulation for loss carryback and carryforward from 2024
From 1 January 2024, some changes will come into effect regarding the amount of loss carryback and carryforward:
- Loss carryback: From 2024, the maximum loss carryback is:
- 1 million Euro for individuals
- 2 million Euro for married couples (joint assessment)
- Loss carryforward: Up to 1 million Euro (individuals) or 2 million Euro (married couples) can be fully deducted. Amounts exceeding this are only credited at 60% of the remaining income.
Planned increase in loss carryforward from 2024 to 2027
Between 2024 and 2027, the loss carryforward will be more generous beyond the above limits. Amounts exceeding this can be deducted up to 70% of the remaining income. This regulation ends in 2027, and from 2028 the 60% rule applies again.
Restrictions on options
Previously, taxpayers could decide whether to partially or completely avoid the loss carryback. Since 2022, this option has been restricted: You can now only completely avoid the loss carryback and carry forward the entire loss to the following year, but no partial amounts can be carried back.
Conclusion
From 2024, the previous maximum limits for loss carryback of 1 million Euro for individuals and 2 million Euro for married couples will apply again. At the same time, the loss carryforward up to these amounts remains fully deductible, while amounts exceeding this can only be deducted at 70% of the remaining income. From 2028, the limit for loss carryforward will be reduced to 60% again. If your income from services is negative, you can continue to use losses through carryback or carryforward to reduce your taxable income.
