Business and nonbusiness items, ownership and other adjustments affect whether a taxpayer has an NOL. Most post-2017 federal NOLs carry forward indefinitely and generally offset no more than 80% of taxable income, with exceptions and transitional rules.
Basis, at-risk, passive-activity and excess-business-loss limits may apply before an owner reaches the NOL calculation. State carryforward rules can differ. A loss does not automatically generate a refund.
An example
Hypothetical: a business reports a book loss after large owner distributions. Because distributions are not deductible expenses, the owner must first reconcile book and tax results rather than carry the bank-account shortfall to a future return.
Reviewed October 7, 2026. IRS reference ↗
This is a general reference. Discuss how the rules apply to your business with your tax professional.