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Net Operating Loss for sole proprietor - do capital gains erase it?

In 2022, my sole proprietorship (Schedule C) had a net loss for the first time.  However, my AGI and taxable income for the year were positive, owing to interest, dividends, and capital gains unrelated to the sole proprietorship.  The sole proprietorship had net profits in 2023. Can I carry forward the 2022 sole proprietorship's loss as a Net Operating Loss or did the unrelated capital gains in 2022 mean I had no Net Operating Loss?  That is, is Net Operating Loss based solely on the sole proprietorship or all of my income sources for 2022, including the unrelated interest, dividends, and capital gains?

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Accepted Solutions
AmyC
Expert Alumni

Net Operating Loss for sole proprietor - do capital gains erase it?

Here is an example of what I believe you are saying:

W2 income $100,000

Interest and dividends $5,000

Business loss -$40,000

Total income for 2022 $65,000 with no NOL to carry over

 

However, if the business loss was greater than all the other income, you could have an NOL that is carried forward. You state positive income on your 2022 return which means no carryover, it was all used. Look at your 2022 tax return to see what happened last year. We do not have access to your return.

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2 Replies
AmyC
Expert Alumni

Net Operating Loss for sole proprietor - do capital gains erase it?

Here is an example of what I believe you are saying:

W2 income $100,000

Interest and dividends $5,000

Business loss -$40,000

Total income for 2022 $65,000 with no NOL to carry over

 

However, if the business loss was greater than all the other income, you could have an NOL that is carried forward. You state positive income on your 2022 return which means no carryover, it was all used. Look at your 2022 tax return to see what happened last year. We do not have access to your return.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Net Operating Loss for sole proprietor - do capital gains erase it?

Thanks so much.  That explains it perfectly.

 

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