Are You Tax Savvy?
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Questions and Answers

What is a net operating loss (NOL)?

  • A tax term that refers to a situation where a taxpayer's deductions equal their income for a tax year.
  • A tax term that refers to a situation where a taxpayer has no income or deductions for a tax year.
  • A tax term that refers to a situation where a taxpayer's deductions exceed their income for a tax year. (correct)
  • A tax term that refers to a situation where a taxpayer's income exceeds their deductions for a tax year.

    • What is the limit on the amount of NOL that can be carried forward each year?

  • 60% of your taxable income for the year
  • 70% of your taxable income for the year
  • 80% of your taxable income for the year (correct)
  • 50% of your taxable income for the year

    • Can NOLs be used to offset capital gains or other non-taxable income?

  • NOLs can be used to offset capital gains, but not other non-taxable income.
  • NOLs can be used to offset other non-taxable income, but not capital gains.
  • No, NOLs can only be used to offset taxable income from a trade or business, from rental real estate, or from certain passive activities. (correct)
  • Yes, NOLs can be used to offset any type of income.

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