An allowable business investment loss (ABIL) represents a special type of capital loss, or reduction in profits, that you can claim against any type of income. In most cases, if you have a capital loss you can only claim the loss against profits from an investment. With an ABIL, you can claim the loss against any income, including income from your job or your small business.

What’s a Business Investment Loss and Who Can Claim It?

While capital gains result when capital asset values rise above the purchase price, a capital loss occurs when a capital asset is sold for an amount lower than its original purchase price. Business investment losses represent a very specific type of loss, which occurs when you dispose of small business corporation shares at a loss or when a small business corporation doesn’t repay a debt to you. In addition, if you own shares in a small business corporation that goes bankrupt, you also can claim a business investment loss.

How Do You Determine the Amount You Can Deduct from an ABIL?

If you had a business investment loss in 2022, you may be able to deduct half of the loss from income. The amount of the loss you can deduct from your income is called your allowable business investment loss (ABIL). Complete Chart 6 to determine your ABIL and, if applicable, your business investment loss reduction. 

If your loss exceeds your income, you can roll the loss back three years or forward for 10 years. In the 11th year, the loss becomes a regular capital loss instead of a business investment loss. At this point, you can only claim the loss against capital gains instead of your income.

How Does an Allowable Business Investment Loss Work?

If you lose money on an investment in a small corporation, you can use an allowable business investment loss to offset your income and reduce your tax bill. This is just one of the ways you can optimize the capital losses you experience as a business owner or investor. Make sure you keep accurate records of your investments by tracking expenses and income. QuickBooks offers one way to do that easily and effectively, especially when it comes to tax time. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.