NOL Carryforward Deduction with Social Security Income

[pblewyn]

We had an NOL in 2023 with a carryforward that will likely take a couple of years to use up.  I understand the carryforward deduction is limited to 80% of taxable income each year.  We also have social security income and the taxable portion is different depending on income with and without the NOL carry forward. If I calculate taxes without the carryforward deduction, I can easily calculate 80% of taxable income to limit the carryforward deduction, but when I then add the carryforward deduction in, it reduces the social security taxable income, so that the ending taxable income is significantly less than 20% of the amount prior to the carryforward deduction. If I force the taxable income to be 20% of the pre-carryforward deduction amount, then I am using less of the carryforward. What is the correct way to calculate this?  Use 80% of the original taxable income as NOL carryforward deduction or adjusting the NOL carryforward deduction down, to compensate for the reduction in taxable Social Security income and ending up with taxable income that is 20% of the original taxable income, but a deduction somewhat less than 80% of the original taxable income? Or something else altogether. Thanks!

I

[Mike9241]

force nothing.  enter the social security benefits from the SSA-1099 and any other items of income or deduction except the previous year's NOL so Turbotax can correctly compute MODIFIED TAXABLE INCOME (MTI). Turbotax does not compute the NOL c/f from 2023, the amount used in 2024, or the remaining carryover, if any. No version has Form 172 which is the new IRS form to compute NOLs 

https://www.irs.gov/pub/irs-pdf/f172.pdf 

MODIFIED TAXABLE INCOME is taxable income figured with the following changes:

1) No deduction for the NOL or capital losses in excess of capital gains 

2) No small stock gain exclusion IRC Section 1202

3) Items affected by AGI are recomputed based on AGI after making the change above.

now look at line 15 of 1040 this is MTI. Your NOL is limited to 80% of this. You have to do the computation 

Enter the smaller of this number or your NOL on schedule 1 line 8. The only method I saw to enter this was through the carryover worksheet. In interview mode for Desktop Deluxe, there was never a question about NOL c/f. (this has been true of TT for decades)  

Turbotax will asks for an  explanation of the NOL 

you can probably enter something like this

a) modified taxable income $$$$$ at 80% = $$$$$$

b) NOL from 2023 $$$$$$$$

c) NOL carryforward to 2025 Line b less line a) $$$$$$$$$$$$$$$$$

this is to allow e-filing. whether the IRS wants more to support the NOL like Form 1045 schedule A for 2023 and Form 172 to figure NOL carryforward to 2025 

If you did not use all your NOL I would manually complete form 172

so you have the carryforward for 2025

keep records for the 2023 return like a PDF (also a copy stored offline) Turbotax deletes returns after 7 years and much earlier it no longer supports opening a .tax 20XX return. For example, right now you can't open a 2020 Turbotax return. 

[pblewyn]

Thank you for the reply. I know I oversimplified my description, but there are no AGI modifications.  So to confirm, there is nothing we need to do about the change in taxable SS income and  the deduction needs to be 80% of taxable income even though the new taxable income after the NOL carryover deduction is less than 20% of the original and is in fact less than 10% of the original taxable income. Is that correct?

Thank you!