A taxpayer has a Net Operating Loss (NOL) in 2024. Which of the following statements is correct regarding the carryover of this NOL?

Answer options:

It can be carried back 2 years and forward 20 years.

It can be carried forward indefinitely, but the deduction is limited to 80% of taxable income.

It can be carried forward indefinitely and offset 100% of taxable income.

It can be carried back 5 years.

How to approach this question

Post-2017 NOL Rules: No Carryback (generally). Indefinite Carryforward. 80% Taxable Income Limitation.

Full Answer

B.It can be carried forward indefinitely, but the deduction is limited to 80% of taxable income.✓ Correct

Under the TCJA, NOLs arising in tax years beginning after 2017 generally cannot be carried back but can be carried forward indefinitely. The deduction is limited to 80% of taxable income (computed without the NOL deduction).

Common mistakes

Applying the old 2/20 rule or assuming 100% offset.

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