An Interactive Guide to Net Operating Losses
Based on Form 172, this tool explains how a Net Operating Loss (NOL) can be used to reduce your tax liability in other years.
What Can You Do With an NOL?
Carry It Forward
Most NOLs arising after 2020 are carried forward indefinitely to future years. This allows you to use a loss from a tough year to reduce your taxable income in future, more profitable years.
Carry It Back (Farming Loss)
A significant exception exists for farming losses. These can be carried back two years, allowing you to get an immediate refund for taxes you paid in those prior years.
NOL Calculator
Enter your total business income and deductions to see how an NOL is calculated. The summary and chart will update automatically.
Calculated NOL Carryover
Key Details
For NOLs arising after 2017, the deduction you can take in a future year is generally limited. You can deduct an amount up to 80% of your taxable income in that future year (calculated before the NOL deduction). Any remaining NOL can be carried forward to the next year.
The Excess Business Loss limitation (Form 461) is applied *before* the NOL calculation. If you have a business loss greater than the annual threshold (for example, $305,000 for single filers in 2024), the excess amount is disallowed for the current year. This disallowed amount is then treated as an NOL carryforward to the next year, becoming part of the NOL you calculate with Form 172.