If your business deductions exceed your business income, you have a tax loss for the year. With a few modifications to the loss, tax law calls this a “net operating loss,” or NOL. If you are just starting your business, it’s possible you have an NOL. You could have a loss year even with a notably successful business.
You used to be able to carry back your NOL two years and get immediate tax refunds from previous years; however, the Tax Cuts and Jobs Act (TCJA) eliminated this provision. Now, you can only carry your NOL forward, and it can only offset up to 80 percent of your taxable income in any one future year.
What does this ultimately mean? You should never stop documenting your deductions, and you should always claim all your rightful deductions. We have spoken with far too many business owners, especially new owners, who don’t claim all their deductions when those deductions would indeed produce a tax loss.