Net Operating Loss carryover

Forum|Forum|5 years ago
February 23, 2021
2 replies
3 views

I have a net operating loss carryover from 2018 but am now retired and not operating a business. Can I still use the NOL carryover to reduce my taxes?

TurboTax Home & Biz Windows

ColeenD3

Level 15

An NOL can only be used against specific types of income. It is a complicated topic that is beyond TurboTax's scope but here is a general idea of how to calculate the carryover going forward.

How To Figure an NOL Carryover

If your NOL is more than your taxable income for the year to which you carry it (figured before deducting the NOL), you may have an NOL carryover. You must make certain modifications to your taxable income to determine how much NOL you will use up in that year and how much you can carry over to the next tax year. Your carryover is the excess of your NOL deduction over your modified taxable income for the carryback or carryforward year. If your NOL deduction includes more than one NOL, apply the NOLs against your modified taxable income in the same order in which you incurred them, starting with the earliest.

Modified taxable income.

Your modified taxable income is your taxable income figured with the following changes.

You cannot claim an NOL deduction for the NOL carryover you are figuring or for any later NOL.
You cannot claim a deduction for capital losses in excess of your capital gains. Also, you must increase your taxable income by the amount of any section 1202 exclusion.
You cannot claim the domestic production activities deduction.
You cannot claim a deduction for your exemptions for yourself, your spouse, or dependents.
You must figure any item affected by the amount of your AGI after making the changes in (1), (2), and (3) above, and certain other changes to your AGI that result from (1), (2), and (3). This includes income and deduction items used to figure AGI (for example, IRA deductions), as well as certain itemized deductions. To figure a charitable contribution deduction, do not include deductions for NOL carrybacks in the change in (1) but do include deductions for NOL carryforwards from tax years before the NOL year

Your taxable income as modified cannot be less than zero.

NOL

asenderAuthor

Level 2

Thanks so much for that quick and thorough reply on a pretty complicated subject. I know that I have a NOL carryover from 2018 that is a healthy figure. My TurboTax files from 2018 and 2019 laid out my NOL in '18 and the carryover in '19 pretty clearly.

So my question becomes: Can I simply use that carryover to reduce my 2020 income (subject to the various contingencies you describe in your response) even if I have no net operating business gains or losses in 2020?

ColeenD3

Level 15

Figuring the amount of an NOL is not as simple as deducting your losses from your annual income.

First, you must determine your annual losses from your business (or businesses). If you’re a sole proprietor who files IRS Schedule C, the expenses listed on the form will exceed your reported business income. If your business is a partnership, LLC, or S corporation shareholder, your share of the business’s losses will pass through the entity to your personal tax return. Your business loss is added to all your other deductions and then subtracted from all your income for the year. The result is your adjusted gross income (AGI).

Business NOL

tamara5

Level 2

I can't figure out how to ask a question on a new topic, so am using this topic to ask my somewhat related question. In my California tax return, Form 3085Q shows up and is asking for an SIC code for a disaster. I have not experience a disaster. I do have losses I am carrying over but they are due to business operations, not to a disaster. How to a resolve this so California does not think I experienced a disaster?