What is a donations carryforward?
Donations and, if applicable, membership fees to promote tax-privileged purposes are deductible as special expenses up to a maximum of 20 per cent of the total income. If you make donations that exceed the maximum amount, the unconsidered amount will be carried forward to the following year and deducted there within the maximum limit. This is known as the donation carryforward. This donation carryforward is unlimited in time and will continue until the previously donated amount has been offset. You will receive an assessment notice from the tax office each year regarding the donation carryforward that has not yet been taken into account.
(2021): What is a donations carryforward?
How are loss carryforwards and loss carrybacks applied?
Losses or negative income are primarily offset against positive income in the same year, if available. The offset is first applied within the same type of income and then with other types of income - without limit. If income remains negative after the loss offset in the same year, you can choose to offset this amount either in the previous year or in subsequent years (loss deduction according to § 10d EStG).
(1) Loss carryback to the previous year: Negative income that is not offset in the year the loss occurs can be carried back to the previous year up to an amount of 1.000.000 Euro - for married couples up to 2.000.000 Euro.
(2) Loss carryforward to the following year: If the negative income is not or not fully offset in the previous year, you will receive a notice of assessment for the "remaining loss carryforward". This amount is then deducted from the total income in the income tax assessment for the following year up to a total amount of 1.000.000 Euro - for married couples 2.000.000 Euro. If the loss amount is still higher, the excess amount will be offset up to 60% of the total income in the following year.
Note: Due to the Corona crisis and the associated restrictions on public life, many self-employed individuals and entrepreneurs will incur a loss for the year 2020 or 2021, which they can then carry back to 2019 or 2020. The tax loss carryback has been improved: Companies should be able to carry back losses from 2020 and 2021 to a greater extent, i.e. offset them against profits from previous years. The permissible loss carryback is doubled to a maximum of 10.000.000 Euro or 20.000.000 Euro for joint assessment (§ 10d para. 1 sentence 1, § 52 para. 18b EStG, amended by the "Third Corona Tax Assistance Act").
This also applies to the provisional loss carryback for 2020 in accordance with § 111 EStG (§ 52 paras. 52 and 53 EStG).
(2021): How are loss carryforwards and loss carrybacks applied?
How do loss deduction, loss carryback and loss carryforward work?
Losses or negative income are primarily offset in the same year against positive income, if available. The offset is first applied within the same type of income and then with other types of income - without any limit (loss offset).
If income remains negative after the loss offset in the same year, you can choose to offset this amount either in the previous year or in subsequent years (loss deduction according to § 10d EStG).
(1) Loss carryback to the previous year: Negative income that cannot be offset in the year the loss occurred can be carried back to the previous year up to an amount of 1.000.000 Euro - 2.000.000 Euro for married couples - since 2013.
(2) Loss carryforward to the following year: If the negative income is not or not fully offset in the previous year, you will receive a notice of determination for the "remaining loss carryforward". This amount is then deducted from the total income in the income tax assessment for the following year up to a total amount of 1.000.000 Euro - 2.000.000 Euro for married couples. If the loss amount is still higher, the excess amount is offset up to 60% of the total income in the following year, so that 40% of the profit is always taxable.
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Due to the coronavirus crisis and the associated restrictions on public life, many self-employed individuals and business owners will incur a loss for the year 2020 or 2021, which they can then carry back to 2019 or 2020. The tax loss carryback is improved: companies should be able to carry back losses from 2020 and 2021 to a greater extent, i.e. offset them against profits from previous years.
The allowable loss carryback is doubled to a maximum of 10.000.000 Euro or 20.000.000 Euro for joint assessment (§ 10d para. 1 sentence 1, § 52 para. 18b EStG, amended by the "Third Coronavirus Tax Assistance Act"). This also applies to the provisional loss carryback for 2020 in accordance with § 111 EStG (§ 52 paras. 52 and 53 EStG).
If negative income cannot be offset by loss offset in the year the loss occurred and by loss carryback to the previous year, please always tick the box "Declaration for the determination of the remaining loss carryforward" at the top of page 1 of the main tax form.
An exception applies to losses from certain sub-income types, such as losses from
- private sales transactions (speculative transactions) according to § 23 EStG,
- other income according to § 22 no. 3 EStG,
- commercial animal breeding and husbandry according to § 15 para. 4 sentences 1 and 2 EStG,
- commercial forward transactions according to § 15 para. 4 sentences 3 to 5 EStG,
- tax deferral models you joined as an investor after 10.11.2005 (§ 15b EStG),
Losses from these sub-income types may not be offset against other types of income, but only against profits of the same sub-income type. Special offsetting rules apply here:
- In the year the loss occurred, a loss offset is only possible within the same sub-income type, i.e. losses from private sales transactions can only be offset against similar profits (only horizontal loss offset).
- If a loss remains after the loss offset, it can be carried back to the previous year or forward to the following year and also only offset against similar profits (only horizontal loss deduction). The same rules and deduction restrictions as described above apply to each individual sub-income type.
(2021): How do loss deduction, loss carryback and loss carryforward work?
