A net operating loss (NOL) occurs when a business’ tax deductions exceed income. Business owners need to learn what a net operating loss is and how it affects their taxes. Essentially, businesses can use an NOL to offset a future tax bill from $100 to $250,000 for up to 20 years.
How a Net Operating Loss Works
Businesses have a net operating loss for many reasons. Some companies struggle in their first year, and expenses exceed income. Other businesses are in a cyclical industry that have bust years followed by boom years.
