NOL Casualty Loss carryforward/CA fires.

Forum|Forum|8 days ago
June 24, 2026
3 replies
49 views

I have a client whose home was burned to the ground in the Federally declared wildfires in Los Angeles. The fire happened in Jan of 2025, and the client elected to take the itemized casualty loss on the 2024 return to get the refund quicker to help get on with her life. The client was under insured (a somewhat robbed by the insurance company as well, surprise!). The 2024 return with the Form 4684 was filed, accepted and refunded without issue reporting the properly calculated loss for both the US Treasury and California. The reported 2024 casualty zeroed out 100% of the client's taxable income.

Here’s my issue: There was about $110,000 of unused loss. When it became time to prepare the 2025 return, the $110,000 was carried forward as a NOL by intuit proseries. I expected this.

While muddling around doing research if there was an exception or work around for the California NOL carryforward, I kept getting information that the FEDERAL NOL is disallowed as well because casualty losses are not eligible to be carried forward.

Question #1: Is this accurate?

Question #2: If so, is this a flaw in ProSeries computation?

Thank you.

sjrcpa

Level 15

Since when does a personal casualty loss create an NOL? Are you confusing negative taxable income with NOL?

The more I know the more I don’t know.

BobKamman

Level 15

Someone must have been absent the day they taught casualty losses in Basic Income Tax 101.

When your loss deduction exceeds your income

If your deductions, including your loss deduction, are more than your income, you may have a net operating loss (NOL). You don't have to be in business to have an NOL from a casualty. For more information, refer to Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts.

https://www.irs.gov/taxtopics/tc515