If you have a net operating loss from last year, you can include that information in TurboTax to see if there'll be a tax benefit. To enter your net operating loss from last year in TurboTax Online:
- If you don’t see 2022 TAXES in the left pane, select the dropdown to the right of Income & Expenses on the Hi, let’s keep working on your taxes! page and then select Let’s get started, Pick up where you left off, or Review/Edit.
- Otherwise, in the left pane, select the Federal dropdown, then Income & Expenses (This is labelled Wages & Income in TurboTax Self-Employed)
- Scroll down and select the Show more dropdown to the right of Other Business Situations
- Select Start or Revisit to the right of Net Operating Loss/QBI Carryforward Loss
- Continue through the ensuing pages, providing all information as appropriate.
An NOL can offset taxable income, regardless of its character. However, the NOL carryforward rules are somewhat complicated. According to the IRS' Net operating losses:
Most taxpayers no longer have the option to carryback a net operating loss (NOL). For most taxpayers, NOLs arising in tax years ending after 2020 can only be carried forward. The 2-year carryback rule in effect before 2018, generally, does not apply to NOLs arising in tax years ending after December 31, 2017. The CARES Act provided for a special 5-year carryback for taxable years beginning in 2018, 2019 and 2020. Exceptions apply to certain farming losses and NOLs of insurance companies other than a life insurance company. Also, for losses arising in taxable years beginning after December 31, 2017, the net operating loss deduction for taxable years beginning after December 31, 2020, is limited to 80% of the excess (if any) of taxable income (determined without regard to the deduction, QBID, and Section 250 deduction) over the total NOLD from NOLs arising in taxable years beginning before January 1, 2018.
Please see NOL deduction limitation in IRS Publication 536 (2022), Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, which provides worksheets, step by step examples and explanations of the adjustments to make to your net operating loss as you carry it from year to year.
