You can elect to carry back either a 2008 or 2009 NOL, but not both, for a period of 3, 4, or 5 years. If you make this election by filing a statement with your income tax return for the tax year of the NOL, you must also attach a copy of the statement to any Form 1045 or Form 1040X on which you deduct the NOL. If you previously elected to waive the entire NOL carryback period for an NOL arising in a tax year ending before November 6, 2009, you can revoke that election if you elect to carry the NOL back 3, 4, or 5 tax years. For more information, see Special Rules for 2008 or 2009 NOLs. See also Rev. Proc. 2009-52, 2009-49 I.R.B. 744.

If you made an election to carry back a 2008 NOL that was attributable to an ESB for a period of 3, 4, or 5 years under Rev. Proc. 2009-26, 2009-19 I.R.B. 935, you can now elect to carry back, under the rules described above, any remaining 2008 or 2009 NOL that was not subject to the election under Rev. Proc. 2009-26.

For more information, see Special Rules for 2008 or 2009 NOLs, on page 8.

The 90 percent limit on the alternative tax net operating loss deduction does not apply to the portion of the ATNOLD attributable to any 2008 or 2009 NOL you elect to carry back more than 2 years.

Beginning in 2009, the portion of any NOL attributable to a qualified GO Zone loss is now limited to the amount of any qualified GO Zone casualty loss and any special GO Zone depreciation or amortization allowable for any specified GO Zone extension property placed in service during the tax year.

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If your deductions for the year are more than your income for the year, you may have a net operating loss (NOL). An NOL year is the year in which an NOL occurs. You can use an NOL by deducting it from your income in another year or years.

This publication discusses NOLs for individuals, estates, and trusts. It covers:

• How to figure an NOL,
• When to use an NOL,
• How to claim an NOL deduction, and
• How to figure an NOL carryover.

To have an NOL, your loss must generally be caused by deductions from your:

• Trade or business,
• Work as an employee,
• Casualty and theft losses,
• Moving expenses, or
• Rental property.

A loss from operating a business is the most common reason for an NOL.

Partnerships and S corporations generally cannot use an NOL. However, partners or shareholders can use their separate shares of the partnership's or S corporation's business income and business deductions to figure their individual NOLs.

You should keep records for any tax year that generates an NOL for 3 years after you have used the carryback/carryforward or 3 years after the carryforward expires.

The following topics are not covered in this publication.

• Bankruptcies. See Publication 908, Bankruptcy Tax Guide.
• NOLs of corporations. See Publication 542, Corporations.

Section references are to the Internal Revenue Code unless otherwise noted.

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Follow Steps 1 through 5 to figure and use your NOL.

Complete your tax return for the year. You may have an NOL if a negative figure appears on the line below:

• Individuals — Form 1040, line 41, or Form 1040NR, line 38.
• Estates and trusts — Form 1041, line 22.

If the amount on that line is not negative, stop here — you do not have an NOL.

Determine whether you have an NOL and its amount. See How To Figure an NOL, later. If you do not have an NOL, stop here.

Decide whether to carry the NOL back to a past year or to waive the carryback period and instead carry the NOL forward to a future year. See When To Use an NOL, later.

Deduct the NOL in the carryback or carryforward year. See How To Claim an NOL Deduction, later. If your NOL deduction is equal to or less than your taxable income without the deduction, stop here — you have used up your NOL.

Determine the amount of your unused NOL. See How To Figure an NOL Carryover, later. Carry over the unused NOL to the next carryback or carryforward year and begin again at Step 4.

If your NOL deduction includes more than one NOL amount, apply Step 5 separately to each NOL amount, starting with the amount from the earliest year.