(NOL) Net Operating Loss Carryforward doesn't change amount due?
Hi, I have a net operating loss from my business for 2022. I entered it on my 2023 return, but it didn't reduce the amount due on my federal return. How do I fix this?
Answers
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Capital losses are limited to $3000 each year. If your return included a loss before the carryover was reported, this could be a reason you did not see a change. Without access to your return, it is difficult to determine for sure. Please contact our support team, this will provide us with account access which will better help us understand your personal situation.
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As far as I know the $3K limit applies only to capital gains, not business losses. Even so, if I limit it to $3K, I still see no change. The loss was in 2022, so this is the first time I would be carrying over.
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I see the impact of the NOL on 1040 Line 8, which is pulling from Schedule 1 Line 10 (really 8A for NOL). This should offset total income calculation on 1040 Line 9, which your standard or itemized or deduction then further reduces, culminating in 1040 Line 15 total taxable income.
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Hi joshcool, your NOL from 2022 can be used to reduce your taxable income and thereby reduce your income tax, but it won't reduce your self-employment tax or any other taxes from Schedule 2. This could explain why you may not notice a difference after adding the NOL information. I can walk you through the calculations, and you can look at your tax return to see what shows there:
The NOL should show on Schedule 1, line 8a. It would then be used to reduce any other additional income reported on Schedule 1. The net amount shows on line 10 of Schedule 1. That amount then get transferred to line 11 of Form 1040 to help determine your total income.
The standard deduction or itemized deduction is then applied on line 12 to get your taxable income on line 15. The important thing to notice here is that if your income was already low enough (before accounting for the NOL) that your taxable income was already $0 on line 15 of Form 1040, then you won't see a difference in the calculation of your tax owed.
In that case, line 16 would still be $0 whether or not you report the NOL.
I hope this helps to clarify things! The good news is that if you weren't able to use the 2022 NOL to benefit you on your 2023 tax return, then you should be able to carry it forward to 2024.
