A loss from operating a business. For income tax purposes, a net operating loss may be carried back two years to offset prior income and get a refund of taxes paid in those years. Any remaining unused loss may be carried forward to benefit future tax years. See also carryback.
The excess of business expenses over income. A business may offset a net operating loss against certain taxes already paid in previous years, or against certain future taxes.
A net operating loss is experienced by a business when business deductions exceed business income for the fiscal year. For income tax purposes, a net operating loss can be used to offset income in a prior year, or a taxpayer can elect to forego the carry back and carry the net operating loss forward.