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Farming business.

A farming business is a trade or business involving cultivation of land or the raising or harvesting of any agricultural or horticultural commodity. A farming business can include operating a nursery or sod farm or raising or harvesting most ornamental trees or trees bearing fruit, nuts, or other crops. The raising, shearing, feeding, caring for, training, and management of animals is also considered a farming business.

A farming business does not include contract harvesting of an agricultural or horticultural commodity grown or raised by someone else. It also does not include a business in which you merely buy or sell plants or animals grown or raised entirely by someone else.

Waiving the Carryback Period

To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b).

If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months of the due date of the return (excluding extensions). Attach a statement to your amended return, and write ¡°obÌåÓýd pursuant to section 301.9100-2¡± at the top of the statement.

Once you choose to waive the carryback period, it is generally irrevocable. The election must be made by the due date of the return, including extensions.

If you do not file this statement on time, you cannot waive the carryback period.

How to Carry an NOL Back or Forward

If you choose to carry back a farming loss, you must first carry the farming loss to the earliest year in the 2-year carryback period. If the farming loss is not used up, you can carry the rest to the next earliest carryback year, and then on to carryover years after the loss year, and so on.

If you waive the carryback period or do not use up all of the farming loss in the carryback period, you will have an NOL that can be carried forward indefinitely until used up. This NOL will be equal to the sum of what remains of the farming loss, plus any nonfarm NOL, plus any excess business loss for the NOL year. See Excess Business Loss , later. Start by carrying the NOL to the first tax year after the NOL year. If you do not use it up, carry the unused part to the next year. Continue to carry any unused part of the NOL forward until the NOL is used up.

For nonfarming businesses, since you can¡¯t carry the NOL to an earlier year, your NOL deduction for tax years beginning after December 31, 2020, cannot exceed the sum of:

Only NOLs arising after 2017 and carried forward to a year after 2020 are subject to the 80%-of-taxable-income limit. The total amount of any NOL deduction for 2021 or thereafter that is attributable to NOLs from tax years after 2017 can¡¯t exceed 80% of taxable income without regard to the NOL deduction or sections 199A or 250.

Deducting a Carryback

If you carry back your NOL, you can use either Form 1045 or Form 1040-X. You can get your refund faster by using Form 1045, but you have a shorter time to file it and because it is not treated as a claim for credit or refund, you may need to file a claim for credit or refund (such as Form 1040-X) if your application on Form 1045 is disallowed. For more information, see the Instructions for Form 1045. You can use Form 1045 to apply an NOL to all carryback years. If you use Form 1040-X, you must use a separate Form 1040-X for each carryback year to which you apply the NOL.

Estates and trusts that do not file Form 1045 must file an amended Form 1041 (instead of Form 1040-X) for each carryback year to which NOLs are applied. Use a copy of the appropriate year's Form 1041, check the Net operating loss carryback box, and follow the Form 1041 instructions for amended returns. Include the NOL deduction with other deductions not subject to the 2% limit. Also, see the special procedures for filing an amended return due to an NOL carryback, explained under Form 1040-X , later.

Carrying back an NOL to an earlier tax year may create an alternative minimum tax (AMT) liability for that earlier year. This may be true even if there was no AMT liability on the tax return filed for that earlier year.

Deducting a Carryforward

If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on Schedule 1 (Form 1040) for the year to which the NOL is carried. Estates and trusts, include an NOL deduction on Form 1041.

Attach a Form 172 for each NOL to your Form 1040 or Form 1041 if it applies.

Change in Marital Status

If you and your spouse were not married to each other in all years involved in figuring NOL carrybacks and carryovers, only the spouse who had the loss can take the NOL deduction. If you file a joint return, the NOL deduction is limited to the income of that spouse.

For example, if your marital status changes because of death or divorce, and in a later year you have an NOL, you can carry back that loss only to the part of the income reported on the joint return (filed with your former spouse) that was related to your taxable income. After you deduct the NOL in the carryback year, the joint rates apply to the resulting taxable income.

Change in Filing Status

If you and your spouse were married and filed a joint return for each year involved in figuring NOL carrybacks and carryovers, figure the NOL deduction on a joint return as you would for an individual. However, treat the NOL deduction as a joint NOL.

If you and your spouse were married and filed separate returns for each year involved in figuring NOL carrybacks and carryovers, the spouse who sustained the loss may take the NOL deduction on a separate return.

Special rules apply for figuring the NOL carrybacks and carryovers of married people whose filing status changes for any tax year involved in figuring an NOL carryback or carryover.

Line 2¡ªNonbusiness Capital Losses

Don't include on this line any section 1202 exclusion amounts (even if entered as a loss on Schedule D (Form 1041)).

Line 6¡ªNonbusiness Deductions

Enter as a positive number deductions that aren't connected with a trade or business. They include:

Don't include on line 6 any business deductions. These are deductions that are connected with a trade or business. They include:

Line 7¡ªNonbusiness Income Other Than Capital Gains

Enter income that isn't from a trade or business. Examples are ordinary dividends, annuities, and interest on investments. This includes:

Don't enter business income on line 7. This is income from a trade or business and includes:

Line 17¡ªSection 1202 Exclusion

Enter as a positive number on line 17 any gain you excluded under section 1202 on the sale or exchange of qualified small business stock.

Lines 19¨C22¡ªCapital Loss Limitation

The amount deductible for capital losses is limited based on whether the losses are business capital losses or nonbusiness capital losses.

You can deduct your nonbusiness capital losses (line 2) only up to the amount of your nonbusiness capital gains without regard to any section 1202 exclusion (line 3). If your nonbusiness capital losses are more than your nonbusiness capital gains without regard to any section 1202 exclusion, you cannot deduct the excess.

You can deduct your business capital losses (line 11) only up to the total of:

Line 23¡ªNOL Deduction for Losses from Other Years

You cannot deduct any NOL carryovers or carrybacks from other years. Enter the total amount of your NOL deduction for losses from other years.

Line 1¡ªNOL Deduction

For the second preceding tax year, enter on line 1 the amount of the current year farming loss carried back to the year. For the first preceding tax year, enter on line 1 the amount from line 10 of Part II for the second preceding tax year.

Line 2¡ªTaxable Income Before the Current Year NOL Carryback

Don't take into account on this line any NOL carryback from the current year or later. However, do take into account NOLs that occurred in tax years before the current year and are otherwise allowable as carrybacks or carryforwards.

Line 3¡ªNet Capital Loss Deduction

Line 4¡ªSection 1202 Exclusion

Enter as a positive number any gain excluded under section 1202 on the sale or exchange of qualified small business stock.

Line 5¡ªQualified Business Income Deduction

Enter as a positive number the amount of any qualified business income (QBI) deduction under section 199A(a) and domestic production activities deduction allocated from specified agricultural or horticultural cooperatives under section 199A(g) claimed on your return for tax years beginning after December 31, 2017. See the Instructions for Form 8995 and Form 8995-A for guidance on figuring QBI and the deductible amount based on threshold income levels.

Line 6¡ªAdjustment to AGI

If you entered an amount on line 3 or line 4, you must refigure certain income and deductions based on AGI. These include:

For purposes of figuring the adjustment to each of these items, your AGI is increased by the total of the amounts on line 3 and line 4. Don't take into account any NOL carryback from the current year or later.

In most cases, figure the adjustment to each item of income or deduction in the order listed above and, when figuring the adjustment to each subsequent item, increase or decrease AGI by the total adjustments you figured for the previous items. However, a special rule applies if you received social security benefits and deducted IRA contributions. Use the worksheets in Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs), to refigure your taxable social security benefits and IRA deductions under the special rule.

Enter on line 6 the total adjustments made to the listed items. Attach a computation showing how you figured the adjustments.

Line 7¡ªAdjustment to Itemized Deductions

Line 9¡ªModified Taxable Income

Combine lines 2 through 8. If zero or less, enter -0-.

Line 10¡ªNOL Carryover to the Subsequent Year

Generally, subtract line 9 from line 1. If zero or less, enter -0-.

After completing all applicable columns, carry forward to the next year the amount, if any, on line 10 of the column for the first preceding tax year.

NOLs arising after 2017 and carried forward to a year after 2020 are subject to the 80%-of-taxable-income limit. The total amount of any NOL deduction for 2021 or thereafter that is attributable to NOLs from tax years after 2017 can¡¯t exceed 80% of taxable income without regard to the NOL deduction or sections 199A or 250. Attach a statement to your tax return showing how you figured the 80% limitation, if applicable.

Line 20¡ªRefigured Mortgage Insurance Premiums

Mortgage insurance premiums that are paid or accrued before 2022 may be deducted like qualified residence interest. See section 163. For years prior to 2022, is your MAGI from line 13 more than $100,000 ($50,000 if married filing separately)?

? Yes. Your deduction is limited. Refigure your deduction using the Mortgage Insurance Premiums Deduction Worksheet next.

? No. Your deduction isn't limited. Enter the amount from line 19 on line 20 and enter -0- on line 21.

Mortgage Insurance Premiums Deduction Worksheet¡ªLine 20

Line 25¡ªCharitable Contributions

Enter your total gifts to charity reported on Schedule A (Form 1040 or Form 1040¨CNR), or as previously adjusted.

Line 26¡ªRefigured Charitable Contributions

Refigure your charitable contributions using line 24 as your AGI unless, for any preceding tax year:

If you can't use the amount from line 24 as your AGI, figure your AGI as follows.

For NOL carryover purposes, you must reduce any charitable contributions carryover to the extent that the NOL carryover on line 10 is increased by any adjustment to charitable contributions.