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

How to Qualify for Tax Deductible Moving Expenses

There are several criteria that you must meet in order to deductible moving expenses. See if you qualify with the tax experts at H&R Block.

TurboTax Live or Tax Pro Go: Which Offers More Tax Expertise?

Not all online assisted tax prep is the same. Find out why H&R Block’s Tax Pro Go offers more full-service expertise than TurboTax Live.

Tax Filing Status for Separated Couples – What Are My Options If My Spouse Moved Out?

How do you file taxes if you're separated? Being separated can affect your filing status and you might be able to file as head of household. Find out more with H&R Block.

Year-End Tax Tips

Learn more about money saying year-end tax tips and get tax answers at H&R Block.