The amount by which deductions exceed income during a year. For a loss to qualify as a net operating loss for tax purposes, the loss must generally be the result of deductions from a trade or business, work as an employee, casualty or theft, moving expenses, or rental property. Net capital losses and personal exemptions are not permitted. In addition, partnerships and S corporations generally cannot use net operating losses. Businesses with a net operating loss can request tax refunds from prior years and carry over any excess losses to future years.