If your deductions for the year are more than your income for the year, you may have a net operating loss (NOL).

A loss from operating a business is the most common reason for an NOL. Other sources of NOL are usually casualty and theft losses, moving expenses and losses from rental property.

While Partnerships and S corporations generally cannot use an NOL, partners or shareholders can use their separate shares of the partnership’s or S corporation’s business loss to figure their individual NOLs.

Any deduction for personal exemptions & standard deduction, capital losses in excess of capital gains, non business losses, domestic production activities deduction and the section 1202 exclusion of the gain from the sale or exchange of qualified small business stock are not allowed when figuring an NOL.

Generally, you can carry back the NOL to the 2 tax years before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carryforward period); or choose not to carry back an NOL and only carry it forward.

 

I created this blog to help understand certain basic aspects of U.S. tax law. Of course, each situation is unique and nothing that is on this site will ever replace the expert advice of a tax professional.

Please do not hesitate to contact me should you have any question

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