Carryover

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Carryover is an accounting method by which the deductions and credits of a taxable year that are either not used in that year, or could not be considered entirely in that year, are then applied to reduce the tax liability of later/subsequent years. Some of the items which may be carried over might include net operating losses, charitable contributions, and investment tax credits, etc.

There is another concept called a carryover basis, which is used to transfer a previous owner's original investment amount (plus improvements) to a subsequent owner for the purpose of calculating gain or loss upon a sale or exchange of an asset. Carryover is also used in other contexts, such as carryover of accrued vacation time or credits earned toward satisfying a minimum requirement in a degree course, etc. (See also: carryback)

[Last updated in June of 2021 by the Wex Definitions Team]