Form 172 - Net Operating Losses

Form 172 is used by individuals, estates, and trusts to calculate the amount of net operating loss (NOL) available for carryback or carryforward. Generally, NOLs arising in tax years after 2020 can only be carried forward, with an exception for certain farming losses which may be carried back 2 years.

For tax years beginning after December 31, 2020, the NOL deduction is limited to the sum of NOLs carried from tax years beginning before January 1, 2018, plus the lesser of NOLs carried from tax years beginning after December 31, 2017, or 80% of taxable income (computed without regard to deductions for NOLs, Qualified Business Income (QBI), or section 250 deductions) .

Part I: NOL 

• This section calculates the amount of the NOL available for carryback or carryforward.
• It involves adjustments to adjusted gross income (AGI) for individuals, or taxable income for estates and trusts, considering nonbusiness and business capital gains and losses, nonbusiness deductions and income, and any section 1202 exclusion.
• The NOL is determined by combining these factors and accounting for any existing NOL deductions from other years.

Part II: NOL Carryover

• Part II is used to figure the NOL deduction for each carryback year and the amount to be carried forward, if not fully absorbed.
• Modified taxable income is calculated, which involves adjustments to taxable income such as excluding the current NOL carryover, capital losses exceeding capital gains, and deductions for exemptions.
• This section includes adjustments to itemized deductions for individuals only if certain conditions are met, refiguring deductions like medical expenses, mortgage insurance premiums, and charitable contributions.