What is a Net Operating Loss (NOL)?
If your business deductions for the year are more than your income for the year, you may have an NOL.
An NOL is usually carried forward. The CARES Act provision that allowed these NOLs to be carried back 5 years expired in 2021.
You can carry certain farming and insurance company losses back to your last two tax returns using Form 1045 . You can calculate the amount of your NOL by filling out Form 172 and attaching it to Form 1045. This will tell you how much refund you can get from applying the NOL to your prior two tax returns.
If you have a farming loss and don't want to fill out Form 1045 and carry your NOL back to the previous two tax returns, you can make an election with your 2025 tax return to not do the NOL carryback. If you make this election, your NOL will carry forward to be used on future tax returns.
There are rules that limit what you can deduct when figuring an NOL. In general, the following items are not allowed when figuring an NOL.
An NOL is usually carried forward. The CARES Act provision that allowed these NOLs to be carried back 5 years expired in 2021.
You can carry certain farming and insurance company losses back to your last two tax returns using Form 1045 . You can calculate the amount of your NOL by filling out Form 172 and attaching it to Form 1045. This will tell you how much refund you can get from applying the NOL to your prior two tax returns.
If you have a farming loss and don't want to fill out Form 1045 and carry your NOL back to the previous two tax returns, you can make an election with your 2025 tax return to not do the NOL carryback. If you make this election, your NOL will carry forward to be used on future tax returns.
There are rules that limit what you can deduct when figuring an NOL. In general, the following items are not allowed when figuring an NOL.
- Any deduction for personal exemptions.
- Capital losses in excess of capital gains.
- The section 1202 exclusion of the gain from the sale or exchange of qualified small business stock.
- Nonbusiness deductions in excess of nonbusiness income.
- Net operating loss deduction.
- The domestic production activities deduction.
