I am filing my 2024 taxes and wanted to carry over a small business loss from 2023. I have actually had losses in previous years just never accounted for the QBI loss carryover before.
Since the number was not auto entered in TurboTax from 2023 I want to enter it but i do not know what number to use in my 2023 tax return. In turbotax it says you find your QBI loss number for 2023 on form 8995 and use the number in line 16. I just want to make sure I am using the correct number beacuse it says something about 20% deducation and was not sure if I can only carry-over 20% of what is in my 2023 8995.
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A net operating loss is different from a Qualified Business Income (QBI) loss that you mention as reported on Form 8995. So you need to know which loss you are dealing with. A net operating loss (NOL) occurs when you have a business loss that is greater than your non-business income. The unused portion of it from one year can be carried over to be deducted from taxable income in future years.
A QBI loss is a business loss from a business that has QBI. It is carried over to offset business income in future years and in so doing it may reduce your QBI deduction in those years. It is not deductible against taxable income, it would simply reduce QBI income used to calculate a QBI deduction.
Your NOL carryover from a previous year would be the amount of your NOL that was not used up in that year. Your QBI loss carryover would be your unused business loss on businesses that qualify for QBI treatment.
Since you reference Schedule 1, I assume you are talking about an NOL. The carryover amount for that would be the NOL carryover from the previous year less the amount listed on Schedule one for the year in question. For instance, If your NOL carryover from 2022 was $50,000 and you reported $10,000 of NOL on Schedule 1 in 2023, your carryover to 2024 would be $40,000.
Also, you can't pick and choose which year to carry a NOL loss over to. You must use it in the next year, and if there is any left over you can carry it over to the year after that, and so on.
Thank you so much for this clarification. All this is kind of new to me so I appreciate your help. After looking back at things I realize I was using the wrong terms. I would not have a NOL because as you described the loss in the business did not make my overall income negative. So that would not count for me. I should have referred to the correct term that was in TurboTax which was QBI Losses.
In Turbotax it says that I get the QBI loss number from my 2023 8995 form on line 16. Is that negative number what I would enter in on my 2024 taxes where it asks for my "Net Operating Loss/QBI Carryforward Loss"? In the tips it says something about a 20% deduction. Does that mean the number I enter in 2024 is 20% of the number that is on my 2023 8995 form or turbotax does that automatically so I just give it the full number.
Yes, enter the full number from line 16 on your previous year Form 8995 as the QBI loss carryover to 2024. The 20% refers to the potential QBI deduction you get each year, it can be up to 20% of your QBI income for the year.
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