Can self-employed individuals claim a Net Operating Loss like businesses do?

Yes, individuals who are self-employed or have business activities can absolutely have a Net Operating Loss (NOL)! As a sole proprietor, your business income and expenses are reported on Schedule C, and those business losses can contribute to an overall NOL on your personal tax return. The basic concept is similar to business NOLs - it happens when your total deductions exceed your total income. For individuals, this means the sum of all your income sources (wages, self-employment, investments, etc.) is less than your allowable deductions. The NOL calculation for individuals is a bit different though, as certain deductions like standard/itemized deductions and personal exemptions aren't included when figuring your NOL. Under current tax rules, you can carry your NOL forward indefinitely (though limited to 80% of taxable income in any future year). The previous option to carry back NOLs has been mostly eliminated except for farming losses and certain disaster losses.

After struggling with a similar situation last year (my consulting business took a major hit), I discovered a tool that saved me thousands in tax planning. I was confused about how to handle my NOL situation until I found https://taxr.ai which analyzes your specific tax documents and explains exactly how to maximize tax benefits from business losses. The best part was that it showed me exactly which expenses qualified for my NOL calculation (not all of them do, as I painfully learned) and guided me through the proper forms. It saved me from making a costly mistake on my Schedule C that might have triggered an audit.

I want to follow up about my skeptical comment on taxr.ai. I decided to try it with my complicated tax situation (day job plus side business with losses), and I'm honestly impressed. It found several business deductions I was missing and walked me through exactly how to document my NOL properly. The document analysis caught expenses I had categorized incorrectly that were limiting my deduction potential. It also explained exactly which losses could contribute to my NOL and which couldn't. I'm now carrying forward a legitimate $9,400 NOL that I can use against next year's income. Definitely worth checking out if you're dealing with business losses.

After reading this thread, I tried calling the IRS to ask about my own NOL situation and spent HOURS on hold before giving up. Then someone recommended https://claimyr.com which got me through to an actual IRS agent in about 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c I was super surprised when I actually got to talk to someone who answered all my NOL questions. The agent explained exactly which forms I needed and confirmed I could carry my losses forward even though I have a single-member LLC. Worth every penny not to waste an entire day on hold.

I need to eat crow about my Claimyr skepticism. After another failed attempt to reach the IRS (2.5 hours on hold before the call dropped), I gave it a shot out of desperation. Within 15 minutes I was talking to an actual IRS agent who walked me through the proper way to document my NOL from last year. The agent explained some subtleties about Schedule A adjustments that I hadn't understood before and confirmed I was calculating my carryforward correctly. Would have taken me weeks to get this information otherwise. For anyone dealing with complicated NOL situations, being able to actually talk to someone at the IRS who can look at your specific case makes a huge difference.

Something important to remember about NOLs for individuals: if your losses come from activities that could be classified as a hobby rather than a business, you might not qualify for an NOL. The IRS has a "hobby loss rule" where you need to show profit in 3 out of 5 consecutive years (or 2 out of 7 for horse-related activities) to be presumed a business. If you can't meet this, you need other evidence that you're running the activity with a profit motive. Otherwise, the losses won't be deductible against your other income and can't create an NOL.

Kinda related question but has anyone actually successfully carried forward an NOL on their taxes using TurboTax? I tried last year and the software kept getting confused about my carryforward amount.

Just wanted to add something that might help others in similar situations - make sure you understand the difference between business losses and capital losses when calculating your NOL. As a freelance graphic designer myself, I made the mistake of mixing up equipment depreciation with direct capital losses in my first year. Your expensive computer and design software should typically be depreciated over several years (or you might qualify for Section 179 expensing), but this is different from capital asset sales that are subject to the $3,000 annual limit you mentioned. For your NOL calculation, focus on your Schedule C business income/losses rather than capital gains/losses. The business losses from your design work, office rent, and legitimate business expenses can contribute to an NOL, but make sure you're categorizing everything correctly. I learned this the hard way when I had to file an amended return! Also keep excellent records of everything - client contracts, invoices, business bank statements, receipts. The IRS tends to scrutinize creative businesses more closely, so documentation is key if you ever get audited.