Calculate Net Operating Loss – Paul Gaulkin CPA

chart showing lossesThe term “net operating loss” is defined as the “excess of deductions over gross income”. This excess of deductions over gross income is subject to modifications which limit the net operating loss to only business losses.

Reporting Loss

A loss reported on a tax return by an individual taxpayer with business income is modified in the following ways in order to determine a net operating loss deduction:

Start with taxable income or loss
+ Any NOL deduction from another year
+ Deductions for personal and dependency exemptions
+ Non-business capital losses exceeding non-business capital gains
+ Non-business deductions in excess of non-business income
= Net operating loss

Non-business deductions include all itemized deductions plus self employed retirement plan contributions. Non-business income is all income not derived from a trade or business, such as dividends, interest, and non-business capital gains. Salary and wages are considered to be trade or business income for purposes of computing an NOL.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.


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