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investopedia defines NOL to be for a company or business. So I think an individual doesn't have NOL. Is it correct?

What is the difference between NOL and capital loss?

What are their relations then? In what cases, capital loss can be NOL?

How can I figure out if I have NOL?

Thanks!

1 Answer 1

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Individuals most definitely can have NOL. This is covered in the IRS publication 536.

What is the difference between NOL and capital loss?

NOL is Net Operating Loss. I.e.: a situation where your (allowable) expenses and deductions exceed your gross income. Basically it means that you have negative income for that year, for tax purposes.

Capital loss occurs when the total amount of your capital gains reported on Schedule D is negative.

What are their relations then?

Not all expenses and deductions that you usually put on your tax return are allowed for NOL calculation. For example, capital loss is not allowed. I.e.: if you earned $2000 and you lost in stocks $3000 - you do not get a $1K NOL. Capital losses are excluded from NOL calculation and in this scenario you still have non-negative income for NOL purposes even though it is offset in full by capital loss deduction and your "taxable income" line is negative. The $1K that was not allowed - gets carried forward to the next year using the Capital Loss Carryover Worksheet in the instructions to Schedule D.

You calculate your NOL using form 1045 schedule A. You can use the form 1045 to apply the NOL to prior 2 years, or you can elect to apply it only to future years (up to 20 years).

In what cases, capital loss can be NOL?

Never.

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  • Thanks! (1) Because of low income, my tax has been zero in 2010, 2011, 2012 and 2013 (though I paid tax before 2010). Suppose I have NOL in 2013, does carryback of NOL (up to 2 years) not help me anything? By "you can elect to apply it only to future years (up to 20 years)", do you mean I can apply NOL to future 20 years if I have NOL? Is it still worth to find out if I have NOL in 2013?
    – Tim
    Apr 21, 2014 at 1:56
  • (2) My line 41 of 1040 Form has been negative in 2010, 2011, 2012 and 2013, i.e. Itemized deductions is bigger than adjusted gross income. I may or may not have NOI (I need to follow form 1045 schedule A to find it out as you said). Is it also worth to find out if I have NOL in 2010, 2011, and 2012?
    – Tim
    Apr 21, 2014 at 1:58
  • (1) (I) doesn't (II) yes, (III) yes.
    – littleadv
    Apr 21, 2014 at 1:59
  • (2) yes, it is. You can still amend 2011 and 2012. 2010 is lost.
    – littleadv
    Apr 21, 2014 at 2:00
  • Thanks! I am filing federal tax on www.freefilefillableforms.com, but I can't find form 1045 there. Can I mail 1045 separately to IRS, while still continue with and submit my 1045 and other forms on www.freefilefillableforms.com?
    – Tim
    Apr 21, 2014 at 2:17

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