Beware of the 80% Cap on Net Operating Losses (“NOLs”)

Beware of the 80% Cap on Net Operating Losses (“NOLs”)

Under the TCJA NOLs from a prior year can only offset 80% of your business profits for future years, but you can carry them forward indefinitely.  NOLs also can no longer be carried back to offset income or create a refund position for earlier years.

There is also an Excess Business Loss Limitation of $250,000 for single filer sand $500,000 for joint filers, which effectively caps the amount of losses you can apply against profits and gains, even for active businesses.