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. The NOL can be carried over to future tax years.

Suspension of NOL deduction for 2024 through 2026

For taxable years 2024 through 2026, California suspended the NOL deduction. Both corporations and individual taxpayers may continue to compute and carry over an NOL during the suspension period.

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.

The NOL carryover period will be extended for each year the NOL deduction is suspended during this time period.

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

Suspension of NOL deduction for 2020 and 2021

For taxable years 2020 and 2021, California suspended the NOL deduction. Both corporations and individual taxpayers may continue to compute and carryover an NOL during the suspension period.

For the 2022 taxable year, the NOL suspension was repealed.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.

The NOL carryover period will be extended for each year the NOL deduction is suspended during this time period.

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

NOL carryover

If you have an NOL, the NOL can be carried over to future tax years.

For tax years 2013 through 2018, the NOL could be carried back to each of the past 2 years. The NOL carryback is no longer available.

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)

Federal vs. California

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

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