How to Compute a Net Operating Loss

Example of NOL Computation

The facts for tax year 2013:

  • You're single, no dependents, under 65
  • Annual salary $5,000 from a part-time job
  • Annual interest income $1,000
  • Net nonbusiness capital gain of $800
  • Net business loss of $15,000
  • Itemized deductions of $7,400
NOL Computation
1 Salary   $5,000
2 Interest   1,000
3 Capital gain   800
4 Business loss   (15,000)
5 Adjusted Gross Income   ($8,200)
  ADD:    
6 Personal Exemption   ($3,900)
7 Itemized deduction   (7,400)
8 Subtotal   ($19,500)
   
9 Adjustments for Disallowed Items:    
10 Personal exemption $3,900  
11 Disallowed excess nonbusiness deduction (see computation below) 5,600 $9,500
12 Net Operating Loss   ($10,000)
Computation of Disallowed Excess Nonbusiness Deduction
Itemized deductions   $7,400
Less:    
Interest income $1,000  
Net capital gain 800 $1,800
Disallowd Excess Nonbusiness Deductions   $5,600

File your personal and small business taxes (Schedule C)