If your deductions for the year are more than your income for the year, you may have a net operating loss (NOL). There is no separate form for an NOL. An NOL year is the year in which an NOL occurs. You can use an NOL by deducting it from your income in another year or years. While the NOL can be carried forward indefinitely, the NOL net operating is limited to 80 percent of taxable income.
To have an NOL, your loss must generally be caused by deductions from your:
- Trade or business,
- Work as an employee (although not deductible for most taxpayers for 2018 through 2025),
- Casualty and theft losses resulting from a federally declared disaster,
- Moving expenses (although not deductible for most taxpayers for 2018 through 2025), or
- Rental property.
A loss from operating a business is the most common reason for an NOL. However, calculating an NOL and the amount to use in any given tax year is not necessarily an easy calculation. Moreover, TurboTax does not compute the NOL calculation. You must use the worksheets in IRS Publication 536 to determine your actual carryover/carryback and your current year NOL.
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