A net operating loss occurs for tax purposes in a year when tax-deductible expenses exceed taxable revenues. Under certain circumstances the federal tax laws permit taxpayers to use the losses of one year to offset the profits of other years. For what period of time can net operating losses be offset against prior or future years' profits?
$\begin{array}{cc}
&\text { Loss Carryback} &\text { Loss Carryforward }\\end{array}$

Question

A net operating loss occurs for tax purposes in a year when tax-deductible expenses exceed taxable revenues. Under certain circumstances the federal tax laws permit taxpayers to use the losses of one year to offset the profits of other years. For what period of time can net operating losses be offset against prior or future years' profits? 
$\begin{array}{cc}
 &\text { Loss Carryback} &\text { Loss Carryforward }\\end{array}$

Quizplus · Accepted Answer

As of my last update in 2023, for federal tax purposes in the United States, net operating losses (NOLs) can generally be carried back two years and carried forward up to 20 years to offset taxable income in those years. This allows businesses to smooth out their taxable income over time, providing tax relief in years when they are profitable.

A Net Operating Loss Occurs for Tax Purposes in a Year