Why is TurboTax saying my net operating loss (NOL) deduction allowed this tax year is zero?

[pher]

I had a net operating loss (NOL) in 2022. I also had a net operating loss for the current tax year filing, 2023, as well as a small income. So, I want to deduct the NOL from 2022 against that small income from 2023.

In the Federal Taxes Deductions section, when TurboTax asked me if I had any NOL carryovers from prior years, I said yes (but it did not ask me the amount). When it asked if I had a Back 2 / Forward 20 carryover, I said no (because I only had a regular carryforward carryover). I also said no when it asked if I had a Back 3 or 5/Forward 15 carryover. But as soon as I said no to both of those, it immediately says, "Your net operating loss deduction allowed this tax year is zero."

I don't understand if I've done something wrong. TurboTax never even asked me what my regular NOL carryover amount was. Where I am supposed to input the carryover?

[RobertB4444]

Your NOL can only be used to reduce your income by 80%.  So if the current year loss already did that then your NOL carryforward would not be eligible to be used.  However, it can still be carried forward indefinitely.

@pher 

[pher]

Thanks for the reply — So I guess what you said would make sense — that if the current year loss has already offset/deducted (to the max) the current year's income, the previous year's carryover can't be used. But in this case, it doesn't even seem like the current year's NOL has been used — because of the message I'm getting that says, "Your net operating loss deduction allowed this tax year is zero." That indicates it hasn't even deducted anything using this year. But my business's spending this year is much higher than my business's income, this year so I don't even understand how this year's NOL deduction could be zero.

@RobertB4444 

[ThomasM125]

A business loss is not the same as a net operating loss. A business loss can be used 100% against current year income. If it is greater than your non-business current year income, it can then create a net operating loss that is carried forward. So, it is possible that you don't have any income left this year after you deduct your current year business losses from your non-business income, in which  case you wouldn't be able to use a prior year net operating loss.

I suggest you look on your tax return form 1040 and add lines 1 to 7 plus any non-business income listed on schedule 1 and deduct your business loss reported on line 3 of schedule 1 to see if that nets out to a positive amount.  If not, you can't claim a deduction from a Net Operating Loss this year.

 To view your form 1040 and schedule 1 to 3:

1. Choose Tax Tools from your left menu bar in TurboTax Online
2. Choose Tools
3. Choose View Tax Summary
4. See the Preview my 1040 option in the left menu bar and click on it
5. Choose the Back option in the left menu bar when you are done 

[pher]

Thanks @ThomasM125 — to clarify (as I didn't make it extra clear in my original post — apologies), this is TurboTax Business rather than an individual tax return where form 1040 would be applicable. I am filing a return for a C Corp.

So, rather than talking about business loss against current year individual income, I am discussing strictly within the business. My business had significantly more spending this year compared to its income this year. And I have definitely entered the income into TurboTax Business in the correct order — before I got to the deductions section. So I don't understand how the software could be saying that there is no NOL deduction for the business this year.

[ThomasM125 · Accepted solution]

You may have a net operating loss (NOL) created this year, but it would only be deductible in carryover years. The NOL is only deductible against net taxable income in a year to which it is carried over. Since you don't have any net income this year, your NOL carryover from the previous year is not allowed to be deducted this year. It will be added to your net operating loss for this year and be carried over to other years as is allowed. You can look on line 12 on schedule K of your form 1120 and you will see the NOL from last year. If you had taxable income on line 28 of form 1120, you would see the allowed portion of last year's NOL listed there. But if there is no taxable income on line 28 then line 29(a), Net Operating Loss deduction, will be $0 for the current year. 

[pher]

Ah! Got it — this makes total sense now. Thank you for the explanation! Glad to know it's not a software issue.