What Is a Net Operating Loss (NOL)?

A net operating loss (NOL) occurs when your business deductions exceed your business income for the year. You can carry the NOL forward to offset income in future years — reducing future tax bills. Under current law, NOLs can be carried forward indefinitely but can only offset up to 80% of taxable income in any given future year. Pre-2018 rules allowed some NOLs to be carried back. NOLs are tracked on your return and can be a valuable asset for businesses with early losses. Work with a tax professional to use them correctly.