In the last blog, we were discussing the capital loss and the limitations on claiming such a loss. However, what happens if the loss was not due to the sale of a capital asset, but due to operating a business, or even a sale of a noncapital asset? Well, the good news is that such losses are “ordinary losses”, and would be able to be claimed against income from other sources (e.g. wages, interest dividends, retirement income, taxable social security income, etc.). However, what if the “ordinary loss” and/or a business operating loss cause a person to have an overall loss, then he/she would have a “net operating loss”.

The great news of sustaining a net operating loss is that, one could take that net operating loss for the currently, and have it carried back to two preceding years. So, if a net operating loss is sustained in 2014, for example, it would be able to first carry back into 2012, and if after applying the 2014 net operating loss for 2012, and there is some net operating loss amount remaining, then it would be applied for 2013. Furthermore, after applying the 2014 net operating loss to 2012 and 2013, respectfully and there is still some remaining net operating loss amount, one could continue to carry forward the net operating loss for twenty (20) years, which would be until 2034 on a 2014 net operating loss. So, the big tax break on a net operating loss is that it would be able to first carry back to the two prior tax years, and any remaining net operating loss amount, then would be able to carry forward for twenty (20) years.

So, if you think that you are operating your business at a loss for 2014, and thereby you think you may have an overall net operating loss, please contact us at [email protected], we would be more than happy to go over your potential net operating loss, and will be able to assist you in carrying it back to the 2012 & 2013 tax years.