The 2017 Tax Cuts and Jobs Act (TCJA) has brought many welcome changes that benefit most taxpayers. There are a handful of changes, however, that directly affect how taxpayers will be able to apply net operating losses (NOL) against taxes owed.
In years past, if a taxpayer incurred an NOL (effectively paying out more than one is bringing in), they could carry-back up to 2 years against taxes paid in those years, which generated a refund to the taxpayer. This was a useful tax tool for taxpayers knowing that an NOL year could generate income in the form of a refund from previous years.
With the enactment of the TCJA, the NOL carry-back was eliminated, meaning a taxpayer could only carry it forward against future years' taxes. NOLs are now far less beneficial since they cannot be carried-back against previous years' taxes. If you are a taxpayer anticipating an NOL this year, please take this into account so that there are no surprises come tax time. The TCJA is silent as to the continuation of a 20 year carry-forward, so taxpayers can still deduct current year NOLs against future years' taxes (up to 80% of the taxable income for such future years).