2023 Publication 536 - Net Operating Losses for Individuals, Estates, and Trusts

A Net Operating Loss (NOL) occurs when a person's or business's allowable deductions exceed their taxable income in a given tax year, resulting in a financial loss. NOLs can be beneficial for tax planning as they can be used to offset taxable income in other years, either by carrying them forward to future years or carrying them back to offset income from the previous two years for farming businesses. However, there are specific rules and limitations governing NOLs, such as annual dollar limits and the types of deductions that can be included. IRS Publication 536 provides detailed information on NOL rules, calculations, carryforward, carryback, and other important aspects related to net operating losses. It is essential to consult with tax professionals or review IRS guidelines to ensure compliance and maximize the benefit of NOLs.