Net Operating Loss - NOL

AAA

DEFINITION of 'Net Operating Loss - NOL'

A period in which a company's allowable tax deductions are greater than its taxable income, resulting in a negative taxable income. This generally occurs when a company has incurred more expenses than revenues during the period.

The net operating loss for the company can generally be used to recover past tax payments or reduce future tax payments. The reasoning behind this is that because corporations are required to pay taxes when they earn money, they also deserve some form of tax relief when they lose money.

INVESTOPEDIA EXPLAINS 'Net Operating Loss - NOL'

If a company has a net operating loss, it can apply this tax relief in two ways: it can apply the net operating loss to its past tax payments and receive a tax credit; or it could apply the net operating loss to future income tax payments, reducing the need to make payments in future periods. The terms of the tax relief and how it can be applied varies by jurisdiction but usually the NOL can be applied to the past few years (two to three) and much more to the future (seven to 10) years.

RELATED TERMS
  1. Operating Loss - OL

    The net loss recorded as a result of a company's unprofitable ...
  2. Form 1045: Application For Tentative ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  3. IRS Publication 536 - Net Operating ...

    A document published by the Internal Revenue Service (IRS) that ...
  4. Dry Hole

    A business venture that ends up being a loss. The buzz word "dry ...
  5. Tax Attribute

    A type of loss or tax credit that must be reduced as a result ...
  6. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
Related Articles
  1. Zooming In On Net Operating Income
    Investing

    Zooming In On Net Operating Income

  2. Deducting Disaster: Casualty And Theft ...
    Taxes

    Deducting Disaster: Casualty And Theft ...

  3. Find Investment Quality In The Income ...
    Options & Futures

    Find Investment Quality In The Income ...

  4. Introduction To Fundamental Analysis
    Markets

    Introduction To Fundamental Analysis

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center