Updated October 29, 2026. Quick answer: The excess business loss threshold for 2026 is $256,000, or $512,000 on a joint return, per Rev. Proc. 2025-32. It is the amount of business losses a non-corporate taxpayer can deduct against other income under section 461(l). The 2025 tax law made the limit permanent for taxable years after 2026. The 2027 version has its own page, the excess business loss limit for 2027.
The 2026 threshold
| Year | Threshold, other returns | Threshold, joint returns | Source |
|---|---|---|---|
| 2026 | $256,000 | $512,000 | Rev. Proc. 2025-32, section 4, item .31 |
| Amounts printed in the statute (2024 edition) | $250,000 | $500,000 (computed: 200 percent of $250,000) | 26 U.S.C. 461(l)(3) |
The IRS wrote it this way: “For taxable years beginning in 2026, in determining a taxpayer’s excess business loss, the amount under § 461(l)(3)(A)(ii)(II) is $256,000 ($512,000 for joint returns).”
The limit becomes permanent after 2026
Before the 2025 tax law the limit was scheduled to end. Section 70601 of Public Law 119-21 is titled “Modification and extension of limitation on excess business losses of noncorporate taxpayers.” Its first change strikes the phrase “and before January 1, 2029,” from section 461(l)(1), and its effective-date rule is “The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2026.” So 2026 is still under the earlier end date, and the rule stays in force for later years with no scheduled end.
What the statute says about the amount
Section 461(l)(3) defines the term: “means the excess (if any) of” the taxpayer’s business deductions over the taxpayer’s business income plus a threshold, which the statute states as “(II) $250,000 (200 percent of such amount in the case of a joint return)”. Section 70601(b) of the same law moves the base year in section 461(l)(3)(C) from 2017 to 2024, and the statute rounds the result: “If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000.”
Common mistakes
- Assuming the limit ends after 2028. The 2025 tax law removed the end date for taxable years after 2026.
- Using a threshold from before 2026. The 2026 amount is $256,000, or $512,000 on a joint return.
- Applying it to a corporation. The limit is for non-corporate taxpayers, as the statute’s title says.
Related: Form 8582, Form 6198, the 2026 tax brackets, and the excess business loss limit for 2027.
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Answer againSources
- Internal Revenue Service, Rev. Proc. 2025-32, tax year 2026 inflation-adjusted amounts, as modified by the One, Big, Beautiful Bill Act: www.irs.gov
- Public Law 119-21 (One Big Beautiful Bill Act), July 4, 2025, enacted text (U.S. Government Publishing Office): www.govinfo.gov
- 26 U.S.C. 461, General rule for taxable year of deduction (U.S. Code, 2024 edition, U.S. Government Publishing Office): www.govinfo.gov
Read from the primary documents linked above on October 29, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.