Question

What should I do if my deductions exceed income earned?

Answer

 

If your deductions exceed income earned and you had tax withheld from your paycheck, you might be entitled to a refund.

You may also be able to claim a net operating loss (NOLs). A Net Operating Loss is when your deductions for the year are greater than your income in that same year. You can use your Net Operating Loss by deducting it from your income in another tax year. Whether you can deduct a NOL from a tax year depends on the type of deductions you have.

To qualify for a Net Operating Loss, the loss you have incurred should be caused by deductions from:

Trade or business

As an employee

Theft

Relocation or moving

Rental property

To support your claim of a Net Operating Loss you will need to keep accurate records for any tax year that is considered a NOL for three (3) years after you have used the carryback/carryforward or 3 years after the carry forward expires.

To learn more about Net Operating Loss (NOLs), visit IRS Publication 536: Net Operating Losses for Individuals, Estates and Trusts at https://www.irs.gov/pub/irs-pdf/p536.pdf.

 

Related Topics

Related Resources

What Is An ITIN? All You Need To Know

An ITIN is issued by the IRS to help people file taxes without a Social Security number. Learn how to get an ITIN number, who qualifies, and where to apply.

What Types of Tax Preparers Are There?

Tax preparers can have various designation and specialties. Learn how different types of tax preparers at H&R Block can help you in person or virtually.

Is Volunteer Work Tax Deductible? | H&R Block

Spending your time volunteering is a great way to give back. Learn more about the tax benefits for volunteer work when filing your taxes at H&R Block.

Taxes Get Personal: What’s Your Filing Status?

Do you know what your tax filing status is? Learn how to determine and check your tax filing status with H&R Block.