Definition:
A net operating loss (NOL) results from the situation in which a business has more allowable tax deductions than it has taxable income. In this case, the business has negative income, or a net operating loss.
The IRS allows individuals and businesses to use losses in one year to offset losses in other years. Net operating losses may be carried back (used to offset profits in previous years) a specific number of years, or carried forward (used to offset profits in future years) depending on IRS regulations in effect at the time of the loss.
