The rules are as follows from IRS Publication 536:
Page 1 ...... NOL deduction limitation. In general, the NOL deduction for tax years beginning after December 31, 2020, cannot exceed the sum of the NOLs carried to the year from tax years beginning before January 1, 2018, plus the lesser of
- (i) the NOLs carried to the year from tax years beginning after December 31, 2017, or
- (ii) 80% of the excess (if any) of taxable income computed without regard to deductions for NOLs, Qualified Business Income (QBI), and section 250 over the total NOL deduction from carryforward amounts from NOLs arising in tax years ending before January 1, 2018.
Page 5 .....Further, when carryforwards can be used, they can only offset 80% of taxable income in future years. While the limitation for excess business loss applies to calculate the amount to deduct as an NOL in the loss year, the deduction is not limited to 80% of modified adjusted gross income in the previous (carryback) year(s). So the full amount of modified adjusted gross income in previous years is used to absorb the loss.
Keep in mind that TurboTax does not calculate the NOL and you must do that manually using the worksheets in the publication.
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