Glossary: Loss Carryforward (Verlustvortrag) Explained

The loss carryforward (Verlustvortrag) is a term from income tax law. It ensures that a loss is not lost but can be carried into later years, as soon as there is positive income there. You are most likely to come across the term if you work self-employed alongside your studies and make a loss in one year.

The Most Important Points at a Glance

• A loss carryforward arises when negative income in the same year cannot be offset against other income.
• It works in income tax. VAT does not have this mechanism.
• The deduction is unlimited up to a total amount of income of 1,000,000 euros. For jointly assessed spouses, the limit is 2,000,000 euros.
• Above that, only 70 percent of the excess amount can be deducted.
• The remaining loss carryforward is determined separately by the tax office, so the loss must appear in your tax return.
• Different rules apply to carrying a loss back into the two previous years, and these can change for limited periods.

How Does the Loss Carryforward Work in Practice?

A simple case shows the mechanism. Assumption: in 2027 you make a loss of 5,000 euros as a self-employed person, and in the year before there was no positive income to offset it against. In 2028 you make a profit of 8,000 euros. The loss carryforward then reduces the profit: 8,000 minus 5,000 gives 3,000 euros, which is subject to income tax. This example is simplified, and other deductions and allowances are not taken into account.

Last updated: October 2026. Source: section 10d EStG.

Why Does the Term Matter for Students?

For students, the loss carryforward is mainly relevant if they work self-employed, for example with start-up losses from their own project. A typical part-time job is generally not affected, because it generates income from wages. If you have losses, state them correctly, because only then does the carryforward arise.

Loss Carryforward or Loss Carryback?

With a loss carryback, the loss goes into the two preceding years. With a loss carryforward, it goes into the following years. The carryback has its own limits, which can change for limited periods. Which rule applies to your year is set out in the current wording of section 10d EStG and in the guidance of the tax office.

Frequently Asked Questions

Do I have to apply for the loss carryforward myself?

You state the loss in your tax return. The tax office then determines the remaining loss carryforward separately and takes it into account in later years. Without this statement, the tax office has no basis for the determination.

Does the loss carryforward have a time limit?

The law sets no fixed time limit for the loss carryforward. It only takes effect, however, when you later earn positive income. Until then, it remains unused.

Does the loss carryforward also apply to trade tax?

Trade tax has its own rules on offsetting losses. Ask the tax office or a tax adviser before you compile your figures.

Is the loss carryforward a sure tax benefit?

No. It is only worth as much as the positive income you earn in later years. Whether and when that happens is often hard to plan for students.

Related Reading

• Loss Carryforward in Studies: Tax Return Step by Step
• Self-Employed While Studying: Business, Tax and Insurance
• Taxes for Students: When You Pay and When You Do Not
• Tax Return for Students: How to Get Your Money Back

Sources: Section 10d Income Tax Act (EStG), loss deduction, gesetze-im-internet.de, last updated October 2026.

Last updated: October 2026. This guide is general information, not individual advice.