Net operating loss

If your deductions and losses are greater than your income from all sources in a tax year, you may have a net operating loss (NOL). You may be able to claim your loss as an NOL deduction. This deduction can be carried back to the past 2 years and/or you can carry it forward to future tax years.

Suspension of NOL carryover deduction

• For individual taxpayers, if they have net business income or modified adjusted gross income of less than $1 million.
• For corporate taxpayers, if their income subject to California taxation is less than $1 million.

NOL deductions disallowed during this time period will be extended for each year they are suspended.

Disaster loss carryovers are not affected by the NOL suspension rules.

Calculate your NOL

To calculate your NOL and NOL deduction visit the following forms:

• Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations — Individuals, Estates, and Trusts (FTB 3805V)
  
  • Form
  • Instructions
  • Form
  • Instructions

  Carryback/carryforward an NOL deduction

  If you have an NOL, you have 2 options:

  Option 1

  Carryback your NOL deduction to the past 2 tax years by filing your amended returns and carryforward any excess.

  For losses incurred in tax years:

  • 2019 and after, NOL can no longer be carried back to the past 2 years.
  • 2013 through 2018, NOL can be carried back to each of the past 2 years.

  Option 2

  Waive your carryback to carryforward your entire NOL deduction to future tax years.

  You may elect to waive your carryback by marking the checkbox on an original timely filed return (including extensions), or on an amended return filed within 6 months of the original due date of the return (not including extensions).

  Waive your carryback

  To waive your option to carryback, make an election by marking the checkbox on your respective form listed below.

  Individuals, estates, and trusts

  Corporations

  If you choose to waive the carryback for a tax year, your choice is irrevocable.

  Federal vs. California

  Your California NOL is generally calculated the same as the Federal. However, allowable amounts and the carryback/carryforward periods differ between Federal and California.

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