What is an NOL carry-forward?
An NOL carry-forward allows taxpayers to apply a net operating loss from one tax year to reduce taxable income in future tax years. Post-2017 NOLs carry forward indefinitely but are capped at 80% of taxable income annually, so they cannot fully eliminate a tax liability in a single year. Sole proprietors, S Corporation shareholders, and C Corporations all track and apply carry-forwards, though the process differs by entity type. Coordinating Depreciation and amortization elections with NOL planning enables businesses to generate loss positions that offset future profitable years more effectively.
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