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 taxable years 2020 and 2021, California suspended the NOL carryover deduction. Both corporations and individual taxpayers may continue to compute and carryover an NOL during the suspension period. Different rules apply depending on the amount of income per year.
For the 2022 taxable year, the net operating loss suspension has been repealed.
The suspension does not apply:
- 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)
- 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:
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.
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)
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.