Using the CARES Act and Tax Loss Harvesting: Strategic Tax Planning Through the Pandemic
Keywords:
CARES Act, Net Operating Loss, NOL Carryback, Business Tax RecoveryAbstract
Unexpected economic upheavals brought forth by the COVID-19 epidemic compelled businesses all around to rethink financial policies in order to save liquidity and minimize significant losses. The CARES Act became a major legislative act providing tax relief that let businesses strategically use net operating loss (NOL) carrybacks and tax loss harvesting. This article investigates how the CARES Act changed tax planning dynamics by momentarily lifting past limitations on NOLs, therefore enabling companies to carry over losses to good years for fast tax refunds. Moreover, the Act allowed businesses to use tax loss harvesting, so enabling the offsetting of taxable gains with losses, so preserving important cash flow. These policies give businesses affected by income declines resulting from the epidemic speedy tax refunds and improved liquidity, therefore offering vital support during times of very limited cash flow. Using actual cases, we show how the CARES Act's enhanced financial resilience helps businesses to recover past investments and reduce continuous financial pressure. This study underlines the need of flexible tax policy during economic crises and explains how specific modifications in tax legislation might assist businesses control economic volatility, increase liquidity, and facilitate recovery. These laws have effects beyond of particular businesses and demonstrate a more general economic reaction in which targeted tax relief initiatives might assist to stabilize entire sectors under distress. This article investigates the tax clauses of the CARES Act to help to highlight the significant role policy plays in preventing financial crises. It underlines how crucial flexible tax structures are always to maintain economic resilience.
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