The determination of the amount of deductible business losses is subject to a limitation for certain taxpayers. This calculation restricts the amount of business losses that can offset other income. The limitation is the excess of aggregate business deductions over the sum of aggregate business gross income or gains plus a threshold amount. For 2023, this threshold amount is \$289,000 for single filers and \$578,000 for those married filing jointly; these amounts are adjusted annually for inflation.
Understanding this limitation is crucial for proper tax planning and compliance. It directly impacts taxable income, potentially increasing tax liability for businesses experiencing significant losses. This provision was introduced by the Tax Cuts and Jobs Act of 2017 and has undergone revisions, making its application and accurate calculation essential for affected taxpayers to minimize their tax burden and avoid penalties.