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Is a business loss carryover the same as a nonpassive business loss?

 
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Is a business loss carryover the same as a nonpassive business loss?

There are three separate losses that you could be referring to. Each is separate and is generated differently.

A business loss is when you have more expenses than income. A Schedule C can report losses on the 1040 undre normal circumstances.

A passive loss is on rental property. You have a special allowance since passive losses are not usually deductible. If you actively participate in a rental real estate activity, you can deduct up to $25,000 of your rental loss even though it’s passive. To actively participate means that you own at least 10% of the property, and you make major management decisions, such as approving new tenants, setting rental terms, approving improvements and so forth.

Either of these can contribute to an NOL, Net Operating Loss. This occurs when you have a business type loss that gives you negative income. Both individuals and Corporations can have an NOL. 

An NOL is not a loss on your business. If you have an NOL, you will encounter the screen in the screen shot below.

NOL Steps

Step 1.   Complete your tax return for the year. You may have an NOL if a negative amount appears on the line below.

  • Individuals — Form 1040, line 41
  • How To Figure an NOL
    If your deductions for the year are more than your income for the year, you may have an NOL.
    There are rules that limit what you can deduct when figuring an NOL. In general, the following items are not allowed when figuring an NOL.
    • Any deduction for personal exemptions.
    • Capital losses in excess of capital gains.
    • The section 1202 exclusion of the gain from the sale or exchange of qualified small business stock.
    • Nonbusiness deductions in excess of nonbusiness income.
    • The net operating loss deduction.
    • The domestic production activities deduction

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New Member

Is a business loss carryover the same as a nonpassive business loss?

There are three separate losses that you could be referring to. Each is separate and is generated differently.

A business loss is when you have more expenses than income. A Schedule C can report losses on the 1040 undre normal circumstances.

A passive loss is on rental property. You have a special allowance since passive losses are not usually deductible. If you actively participate in a rental real estate activity, you can deduct up to $25,000 of your rental loss even though it’s passive. To actively participate means that you own at least 10% of the property, and you make major management decisions, such as approving new tenants, setting rental terms, approving improvements and so forth.

Either of these can contribute to an NOL, Net Operating Loss. This occurs when you have a business type loss that gives you negative income. Both individuals and Corporations can have an NOL. 

An NOL is not a loss on your business. If you have an NOL, you will encounter the screen in the screen shot below.

NOL Steps

Step 1.   Complete your tax return for the year. You may have an NOL if a negative amount appears on the line below.

  • Individuals — Form 1040, line 41
  • How To Figure an NOL
    If your deductions for the year are more than your income for the year, you may have an NOL.
    There are rules that limit what you can deduct when figuring an NOL. In general, the following items are not allowed when figuring an NOL.
    • Any deduction for personal exemptions.
    • Capital losses in excess of capital gains.
    • The section 1202 exclusion of the gain from the sale or exchange of qualified small business stock.
    • Nonbusiness deductions in excess of nonbusiness income.
    • The net operating loss deduction.
    • The domestic production activities deduction

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