IRC §172 · 26 U.S.C. §172
IRC §172: Net Operating Loss Deduction
IRC §172 carries net operating losses forward indefinitely — offsetting up to 80% of taxable income a year, with no carrybacks for most businesses. The bad year that shelters the next decade’s profits.
Watch: Section 172 in 33 seconds.
What it governs
- NOLs carry forward indefinitely — no expiration since TCJA
- Each year’s deduction capped at 80% of taxable income (computed without the NOL)
- No carrybacks for most taxpayers — farming and some insurers excepted
- Excess business losses face a separate indexed annual cap before §172 even applies
Related sectionsIRC §165 — the loss deduction that creates the NOL · IRC §162 — the business expenses inside the loss
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Questions this section answers
- How long can I carry an NOL forward?
- Forever — post-2017 NOLs never expire. But each year absorbs at most 80% of taxable income, so a large loss unwinds over multiple profitable years rather than wiping one out.
- Can I carry a 2026 business loss back for a refund?
- Almost certainly not — general NOL carrybacks ended with TCJA (the COVID window closed). Farming losses and certain insurance companies keep narrow carryback rights; everyone else carries forward.
- Where do I track my NOL?
- Form 461 (Limitation on Business Losses) computes the current-year limit; the carryforward itself rides on worksheets year to year. Lose the worksheet chain and the loss effectively vanishes — keep every year’s computation.
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