For income tax purposes, a business loss generally occurs when a business’s deductions for the year exceed its revenue. But you can turn lemons into lemonade with the net operating loss (NOL) deduction. An NOL this year can be deducted from taxable income next year. NOL deductions can’t offset more than 80% of taxable income for the year. Any excess NOLs can be carried forward indefinitely to offset taxable income in future years until used up. But when losses pass through to owners of S corporations, partnerships and limited liability companies, the “excess” business loss limitation could reduce the tax benefit in any given year. Contact us if you have questions about NOL deductions.
