FULL HOUSE Act Eases Business Loss Limits

The FULL HOUSE Act, aimed at easing limits on business losses for noncorporate taxpayers, has been read twice in the Senate and referred to the Committee on Finance. This legislation seeks to modify the excess business loss rule under Section 461(l), which currently caps deductions at $313,000 for single filers in 2025—dropping to $256,000 in 2026—before excess amounts must be carried forward as net operating losses.[1][9][13] By addressing these thresholds, the bill could provide tax relief to entrepreneurs and small business owners facing downturns.

The excess business loss limitation, introduced in the 2017 Tax Cuts and Jobs Act, restricts individuals, trusts, and estates from offsetting nonbusiness income like wages or investments with trade losses beyond set limits, deferring benefits to future years.[1][7][13] The FULL HOUSE Act builds on broader tax reform efforts, including the One Big Beautiful Bill Act, where the Senate Finance Committee has proposed making such rules permanent while tweaking carryover mechanics for losses after 2025.[7][10][13] Congress is weighing these changes amid ongoing budget reconciliation talks.

For Milwaukee residents, this matters as the city hosts thousands of pass-through businesses—sole proprietorships, partnerships, and S-corporations—that drive local jobs in manufacturing, brewing, and services. Easing loss limits could help owners like those hit by supply chain woes or economic dips deduct more immediately, boosting cash flow and potentially spurring investment in Wisconsin's economy, per Federal Reserve data on small business resilience.

The bill now awaits Finance Committee action, with a possible Senate floor vote if negotiations align House and Senate versions. Business groups are watching closely for final passage before 2026 tax filing season.