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You Make the Call - May 14, 2026

Published:
By: NATP Staff
Tax professional reviewing net operating loss carryforward rules and 80% taxable income limitation for 2026 returns

Question: After a difficult few years, Taylor reported a net operating loss (NOL) on her 2025 tax return. In 2026, her situation improved, and she had taxable income again. How much of that 2025 NOL can Taylor use to offset her 2026 taxable income? 

Answer: To determine how much NOL Taylor can use in 2026, she first needs to calculate 2026 taxable income before any NOL deduction, qualified business income (QBI) deduction, or foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) (§250) deduction. Next, she needs to identify if there are any NOL carryforwards from tax years beginning before Jan. 1, 2018, and apply those first, to offset her 2026 taxable income. Those pre-2018 NOLs can be used first and may fully offset taxable income.  

If there is still any taxable income for 2026 remaining after applying all pre-2018 NOLs, Taylor needs to identify any NOL carryforwards from tax years beginning after Dec. 31, 2017, and use them to offset that remaining 2026 taxable income. However, she can apply those post-2017 NOLs only up to 80% of the excess, if any, of the 2026 taxable income computed without regard to the NOL, QBI and §250 deductions, over the pre-2018 NOLs carried to the year.  

Any NOL that cannot be used because of that 80% limit, Taylor can carry forward to the next year.  

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NATP Staff

The NATP team is dedicated to supporting tax professionals with expert insights, industry updates and resources that help them serve their clients with confidence.

Information included in this article is accurate as of the publication date. This post does not reflect tax law changes or IRS guidance that may have occurred after the publishing date.