Carryover of NOLs Arising in 2018 or Later Years
Below, find IRS rules regarding the carryover of net operating losses arising in 2018 or later years. Exceptions to the standard rules are also outlined in this helpful guide.
General Rule
For losses arising in a year beginning after 2017, the carry forward is indefinite until the NOL is used up. (IRC Sec. 172(b)(1)(A) There is no carry back (except for a farming loss) for NOLs occurring after 2020.
Farming Exception
Certain farming losses may be carried back 2 years. For this exception a farming loss is the lesser of:
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The amount that would be the NOL for the tax year if only income and deductions attributable to farming businesses are taken into account, or
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The amount of the NOL for the tax year.
80% Rule
For post-2020 tax years to which an NOL is carried the amount of taxable income for that year that can be offset by NOLs arising in years after 2017 is limited to the lesser of:
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The aggregate of the NOL carryovers to that year, plus the NOL carry backs to that year, or
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80% of the taxable income computed without regard to the NOL deduction for the year. The 80% limitation does not apply to losses that arose in years before 2018.
CAUTION
The 80% rule only applies to NOLs carried to years after 2020 and that occurred after 2017, so it will be necessary to track pre-2018 and post-2017 NOL carryovers separately in order to correctly apply the 80% limitation. Your tax software should be able to do this, but you should verify that it is accurately doing so.