Net operating loss

Overview

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.

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) -
  • Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations — Corporations (FTB 3805Q) –

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.

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

Check the box in Section C — Election to Waive Carryback on your:
Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations — Individuals, Estates, and Trusts (FTB 3805V)

Corporations

Check the box in Part I - Election to waive carryback on your:
Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations — Corporations (FTB 3805Q)

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.

Visit Instructions for Form FTB 3805V or Instructions for Form FTB 3805Q for more information.