I used the Safe Harbor method last year to determine my Hurricane Harvey casualty loss. The losses exceeded my AGI. Can I carry forward the "leftover" casualty loss onto my 2018 return? I use TurboTax in case anybody knows of a problem with this.

I am curious about the answer here as well. I have been researching it, and I think the answer is you have to carry the net operating loss back to 2016. You can carry it forward if you elect to waive the carry back option, but you would have had to do that prior to October of 2018. Now the only option is to file an amended 2016 return applying the net operating loss.

I hope someone more knowledgeable tells me this is wrong because I want to apply it to this year rather than going back.

I re-did my 2016 return, and it came within a few dollars of the 2017 return. So of course I just left it the way it was, and applied the casualty loss to 2017. Wouldn't the fact that you could choose either year imply that the casualty loss would exceed AGI for many people? However, I see no discussion about whether it can be carried forward...or back. I'm wondering if the safe harbor method is a tradeoff for being able to carry forward...

You would have a NOL in form 1045, however you must go back 3 years and not carry to 2018 u less you elected to forego going back 3 years and only carry forward.

To be more specific. You should have elected to only carry forward. If you didn't elect to only carry forward, then you don't go back to 16, you go back to amend 14, then if that doesn't use all of the NOL you amend 15, then 16.... then if any is still left your carry to 18

Okay, thanks. I think the IRS was allowing those affected to choose either 2016 or 2017, but not both. I suppose that means that further NOLs would be carried forward. Since the 2018 return will consume the remaining amount of the NOL, I should just file it with 2018, right? No need to re-open an old return at this point is there?

The publication 536 and Form 1045 may mean something to business owners, but to me they are just Greek. Basically, I look at my schedule A from 2017, and my itemized deductions exceed my AGI. Is it really more complicated than that? Can't I just take that delta and enter it as "negative income" for 2018?

Some misinformation here.

Basically when the federal disaster happened you could choose to file it on your 17 or amend your 16.

Once you chose to file it on your 17, if that generates a NOL then you were required to either elect to carry forward and not backwards (deadline to elect was oct 15,2018), OR you MUST go back 3 years. So you must amend 14 and carry the NOL to 14, then any unused to 15 and finally 16. Of some still left then it would go to 18.

You could choose to play ignorant and carry to 18 and pretend you made the election to not go backwards. Who knows if the IRS would catch it.

As for where to put the info and what numbers to use, the 1045 should have been on your 17 and given the NOL amount to use on the 18. It isn't as easy as a negative income number on 18. There is more to it than that!!

lockett93 said:

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Some misinformation here.

Basically when the federal disaster happened you could choose to file it on your 17 or amend your 16.

Once you chose to file it on your 17, if that generates a NOL then you were required to either elect to carry forward and not backwards (deadline to elect was oct 15,2018), OR you MUST go back 3 years. So you must amend 14 and carry the NOL to 14, then any unused to 15 and finally 16. Of some still left then it would go to 18.

You could choose to play ignorant and carry to 18 and pretend you made the election to not go backwards. Who knows if the IRS would catch it.

As for where to put the info and what numbers to use, the 1045 should have been on your 17 and given the NOL amount to use on the 18. It isn't as easy as a negative income number on 18. There is more to it than that!!

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And the carryback is two years rather than three, but as I recall in some instances where the NOL was from a qualified disaster area losses there was a five year carryback.

I sold some stocks at the end of 2017 to help pay for repairs. Of course, this boosted my AGI. When I did the taxes for 17, the deductions were still greater than AGI. I was lamenting the fact that I should have sold more stocks, since I could basically take the gains tax free up to the limits of my deductions. Also, had I done that, I wouldn't have this undecipherable NOL to deal with. Pub 536 skips entire sections of boxes in the instructions, and when it tries to explain things, it fails to put it in layman's terms. As for the whole carry forward or carry back issue, no mention of NOL was made in any of the tax seminars I went to following Harvey. Rooms full of people whose losses exceeded their incomes, in depth explanation of the safe harbor method, but no mention of NOL. As for this "carry back rejection" deadline, nobody sits around thinking about their 2014 taxes in October. The 1045 form isn't even filed, so I guess I could find somebody to create one and shove it in with my 2017 taxes. It's not like the numbers aren't there already. I had some insurance help, but there are a lot of normal people out there with 6 figure NOLs. I'm guessing a lot of them are at least as clueless as me. I'd just like to know how to calculate it first, then worry about which zombie to resurrect. Can't imagine why it matters at this point, since I'm not trying to get an early refund.

"You could choose to play ignorant and carry to 18 and pretend you made the election to not go backwards. Who knows if the IRS would catch it."

And if they did catch it, why would they possibly care? The brackets have lowered since then, so I guess they'd make a few bucks.

Standard casualty loss NOL is carried back 2 years. Federally declared disaster is carried back 3 years, and farming losses are carried back 5 years.

But isn't the purpose so that the "loser" can get refunds faster? That's irrelevant here. You'd potentially get a larger refund by shopping around for a year with the highest bracket, right?

Foregoing an NOL deduction is done by affirmative election and must be done on an originally filed return. If you don't make that election, you are forced to carry back first to the earliest possible year, then forward.

As I recall, you lose some of the benefit when you carry individual NOLs forward or back, so it's not as easy as taking the negative number you had on 2017 and putting it on another return as negative income.

OldArmyBrent said:

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Foregoing an NOL deduction is done by affirmative election and must be done on an originally filed return. If you don't make that election, you are forced to carry back first to the earliest possible year, then forward.

As I recall, you lose some of the benefit when you carry individual NOLs forward or back, so it's not as easy as taking the negative number you had on 2017 and putting it on another return as negative income.

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Thanks. However, I didn't forego any deduction. I took the max amount I could. I'll talk to my friend who is a CPA, and who flooded, to see what he can tell me. If I learn anything that's in plain English, I'll share here and probably on the Houston board.

Slight update. The IRS does have a special number, 855-562-5527, for people in Federally-declared disaster areas, but they no longer provide information or guidance to people dealing with potential Net Operating Losses...due to "budget cuts." Imagine that - they run out of money for helping people who might be due larger refunds...shocking.

94chem said:

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OldArmyBrent said:

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Foregoing an NOL deduction is done by affirmative election and must be done on an originally filed return. If you don't make that election, you are forced to carry back first to the earliest possible year, then forward.

As I recall, you lose some of the benefit when you carry individual NOLs forward or back, so it's not as easy as taking the negative number you had on 2017 and putting it on another return as negative income.

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Thanks. However, I didn't forego any deduction. I took the max amount I could. I'll talk to my friend who is a CPA, and who flooded, to see what he can tell me. If I learn anything that's in plain English, I'll share here and probably on the Houston board.

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You misread that. it says Election not deduction, which is what I've been saying. If you didn't elect to ONLY go forward, then you would be required to go back to 2014 and amend... That's the law. but, if you were to put your NOL on your 18 and not amend your 14, who knows if anyone would ever know...

Thank you. Now I've just got to get help on how to fill out the form. I don't even know if I qualify. Would have just sold more stock at the end of 2017 in order to avoid this. Basically could have had tax free income. Of course, since not all income is taxed at the same rates, tax free interest income would be better than tax free capital gains. What a messy system...

Sorry. It was late and I was not clear. I agree with Lockett. The NOL deduction is what you carry back and/or forward. The current year loss is different. Even congress confused the two when writing the new tax law.

Sounds like you have it all figured out now, though. Good luck.