Carryover is a legal concept that is used in many contexts, from tax law to labor laws. In its simplest form, carryover is the principle that unspent resources or available funds in one period can be recouped and applied to future periods. For example, if you consistently accrue more vacation time than you take in a given year, any extra vacation days can be carried over into the following year. An employer can limit the amount of vacation time that can be used in the following year, but carryover allows employees to take advantage of all the vacation time they’ve earned.
Carryover can also be applied to incentives or bonuses that increase in an employee’s annual earnings. Some companies offer a bonus program that, if an employee doesn’t use all of the bonus available that year, any remaining amount can be carried over into the following year. This allows employees to maximize their earnings over two or more years, and it can give companies more flexibility in managing their payroll.
Carryover can also apply to taxes. The concept of deductions or tax credits that have their value extend to future years is an example of carryover in tax law. Many times, employees and businesses will use carryover to offset their tax liabilities for the coming year. For example, if an employee has a high deductible medical plan in one year, they can use the remaining amount they won’t use in that period as a deduction for the following tax year.
In general, carryover is a great way for businesses and individuals to optimize their finances and maximize their benefits. Carryover allows employees and businesses to take full advantage of their resources and use them effectively. Before signing on to any benefits package, consulting a professional to understand how rules like carryover apply can help employees and business owners save money.