This is a common question that can get complicated with all the rules and new laws. But, the good news is that you will likely have a net operating loss (NOL) if your business tax deductions for the year are greater than income which means lower taxable income in preceding or future years.

There’s a New Tax Rule in Town
That’s right the Worker, Homeownership, & Business Act of 2009 allows almost all taxpayers with net operating business losses in either 2008 or 2009 to carry-back those losses for up to 5 years (normal the carry-back is 2 years). Pretty nice, right? You got it, but keep in mind there are limitations to the carry-back and TARP recipients are disqualified from this perk. The other major limitation is that you cannot offset more than 50% of your taxable income in the fifth preceding year (i.e. 2003), but you can in the 3rd or 4th preceding year. For more of the details as well as helpful Q&A guidance visit the IRS Website or utilize the BIDaWIZ service & ask one of the Licensed Tax Specialists as this topic can get very complicated.

Can You Still Carry-forward a Net Operating Loss?
Yes, you can carry-forward a net operating loss up to 20 years. But keep in mind that this new legislation was passed in large part because many businesses during the recession years (2008 and 2009) accumulated large net operating losses and with likely high taxable income levels in 2003 onward (Bull Market Years), taxpayers will likely get added tax relief now if they carry-back. The future is still uncertain so carrying forward net operating losses in what could be an economy of modest growth in the years ahead may not be the smartest thing.

Are All Tax Deductions included in the NOL?
Unfortunately, not. Like most things in tax law, most tax benefits or breaks come with rules.

These items are not included in an NOL

* Deductions for Personal Exemptions
* Capital Losses in Excess of Gains Investments
* Section 1202 Exclusion of 50% of the Gain from the Sale or Exchange of Qualified Stock
* Non-business Deductions in Excess of Income
* Net Operating Loss Deduction
* The Domestic Activities Deductions

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