Carryover Law and Legal Definition

Carryover is a method of accounting by which the deductions and credits of a taxable year are not used in that year, but applied to reduce the tax liability of later years. Some of the items which may be carried over might include net operating losses, charitable contributions, and investment tax credits.

There is also a concept called a carryover basis which is used to transfer a previous owner's original investment (plus improvements) amount 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.