Use losses for tax: secure the loss carryforward

Anyone who has more deductible costs than income in a year, such as students with training costs or the self-employed in the start-up phase, can carry the loss forward into later years. Once you then have income, the loss carryforward reduces your tax. It is important to have it assessed in good time.

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Negative income that is not offset in the year it arises can be carried forward into later years (loss carryforward, § 10d EStG). It then reduces the taxable income once you earn income.

For students it can be especially worthwhile if the training counts as a second training course or studies after completed initial training, then the costs are carryforward-eligible as income-related expenses. You must assert the losses via the tax return.

What you should do now

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1. Record losses
Record years with high deductible costs and low or no income (e.g. studies, start-up phase).
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2. File the return
File a tax return for these years and apply for the assessment of the remaining loss carryforward.
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3. Check retroactively
For past years you can often still make up the assessment, check the deadlines.
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4. Offset later
Once you have income, the assessed loss carryforward reduces your tax.

How to spot the scam

You file no return in loss-heavy years and forfeit the carryforward.
The assessment of the loss carryforward is not applied for.
Deadlines for retroactive returns pass unused.

Frequently asked questions

What is a loss carryforward?

The possibility of carrying negative income (losses or high deductible costs without sufficient income) into later years (§ 10d EStG). Once you then earn income, the loss carryforward reduces your taxable income and thus your tax.

Is it worthwhile for students?

Often yes, especially with studies after completed initial training or a second training course: then the training costs are income-related expenses and carryforward-eligible. You secure them by filing a tax return even without income and having the loss carryforward assessed.

Can I do this retroactively?

For past years the assessment of the loss carryforward can often still be made up, as long as the deadlines have not expired. Check your options and file the missing returns with the application for loss assessment promptly.

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General information for self-help, not legal advice (RDG). In case of a high loss or uncertainty: contact a consumer advice center or a lawyer.