Richey May’s Inside the One Big Beautiful Bill Act video series is designed to help mortgage lenders and other industry-affiliated businesses understand what this sweeping legislation means in practice, not just in theory. Hosted by Kenny Burch, Director, Mortgage Banking Tax, the series features focused conversations with experts from Richey May’s Mortgage Banking Tax team, each examining a specific provision of the Act and its implications.
In this episode, Kenny is joined by Josh Katz, Tax Manager, to explain the Excess Business Loss (EBL) limitation under Section 461(l), a rule that can materially affect passthrough owners during loss years. While many business owners assume losses will automatically offset other income, the EBL limitation imposes a hard cap on the amount of business loss that can be used in a given year, making advance planning especially important.
Key Takeaways from the Episode
- Losses face multiple hurdles before they’re deductible: Before the EBL limitation even applies, passthrough owners must first clear basis, at-risk, and (where applicable) passive loss rules.
- The EBL limitation caps usable business losses: Section 461(l) limits how much total business loss a taxpayer can deduct in a single year, even if the business generated substantially larger losses.
- The rule applies across all business activity: The limitation looks at aggregate business income and losses, including business-related capital gains, not just operating results.
- Disallowed losses don’t disappear: Any excess business loss becomes a net operating loss (NOL), which carries forward indefinitely—but with limits on how much can be used each year.
- Loss years can still create tax bills: Owners with significant non-business income may owe tax even when their business operates at a loss, underscoring the importance of proactive planning.
Taken together, these rules make it clear that business losses are not always immediately usable, and that timing and coordination matter just as much as the size of the loss itself.
Watch the full episode below to hear Kenny and Josh walk through how the Excess Business Loss limitation works, why it was made permanent under the One Big Beautiful Bill Act, and what passthrough owners should be thinking about before year-end.
Continue the Conversation
This episode is part of the Inside the One Big Beautiful Bill Act series, which explores additional provisions shaping the mortgage banking tax landscape. Visit the series page to watch other episodes and stay current as new guidance continues to emerge.
If you have questions about Excess Business Loss limitations or any aspect of the One Big Beautiful Bill Act that may impact your organization, the Richey May Mortgage Banking Tax team is available to help.
