Indiana Net Operating Loss Computation for Individuals

Net Operating Loss Computation for Individuals
Form IT-40NOL
Indiana Department of Revenue

Schedule

IT-40NOL

Individual Income Tax
Net Operating Loss Computation

State Form 46004
(R20 / 9-22)

2022

Enclosure Sequence
No. 16

Your Name										Your Social Security Number

IMPORTANT: Indiana net operating loss deductions claimed after Dec. 31, 2011 must be carried forward.
Part 1 – Computation of Indiana Net Operating Loss__________________________________________ Loss Year
1.	 Enter as a negative amount your federal net operating loss as calculated on the last line of the
federal Form 1045, Schedule A (see instructions). Note: If the amount on the last line of Form 1045,
Schedule A is positive or zero, or if you are a full-year or part-year nonresident, see instructions______ 	1
2.	 Enter certain add-backs from the loss year IT-40 or IT-40PNR (see instructions)__________________ 	2
3.	 Enter as a positive amount the aggregate of any NOL from this loss year previously carried back
(see instructions)___________________________________________________________________ 	3
4.	 Add lines 1, 2 and 3_________________________________________________________________ 	4
5.	 Enter certain deductions from the loss year IT-40 or IT-40PNR (see instructions)__________________ 	5			
6.	 Subtract line 5 from line 4. If the amount is zero or greater, enter zero __________________________ 	6
7.	 Enter (as a negative number) any disallowed excess business loss incurred in the taxable year.
See instructions if you are a full- or part-year nonresident ___________________________________	7
8.	 Add lines 6 and 7. This is your Indiana NOL available to carryforward_______________ Indiana NOL	

8	

Part 2 - Record of Indiana NOL Application
(1)

(2)

Enter the year to which you
are carrying the loss.

Indiana AGI available to be
offset (from the Carryforward
Worksheet, line 5)

(3)
Indiana NOL available for
deduction (from the Carryforward Worksheet, line 6; enter
as positive amount)

(4)

(5)

Enter the amount from
either line 7 or line 8 of the
Carryforward Worksheet.

Indiana NOL deduction: Enter
the amount from line 9 of the
Carryforward Worksheet

1st Year:
2nd Year:
3rd Year:
4th Year:
5th Year:
6th Year:
7th Year:
8th Year:
Attach additional sheets if necessary.

*24100000000*
24100000000

Schedule IT-40NOL Carryforward Worksheet: Enter Loss Year
Complete one column before going to the next
column. See instructions.

Column A

Column B

Column C

Column D

Column E

1st following
tax year______

2nd following
tax year______

3rd following
tax year______

4th following
tax year______

5th following
tax year______

Note: If you have previously carried a loss to this
year, skip lines 1 through 4. Enter on line 5 the
modified Indiana AGI from the previous year’s
worksheet.
From the intervening year’s IT-40/IT-40PNR:
1.	Enter the amount from IT-40/IT-40PNR
line 1 (if reporting from IT-40PNR for tax
year 2008 or before, skip line 2 and enter
the same amount on line 3)......................
2.	Enter some or all of the Indiana add-backs
from the intervening year’s return (see
instructions)...............................................
3.	Subtotal: Add lines 1 and 2 and enter total
here...........................................................
4.	Enter some or all of the Indiana deductions from the intervening year’s return (see
instructions)...............................................
5.	Intervening year’s Indiana AGI: Subtract
line 4 from line 3 (if less than zero, enter
zero)..........................................................
6.	NOL available for carryforward. Enter as a
positive number....................................... ►
Complete line 7 OR line 8
7.	If line 5 is greater than or equal to line 6,
enter the difference here..........................
8.	If line 6 is greater than line 5, enter the
difference here and on line 6 in the next column. This is the remaining NOL available to
be carried forward.....................................
9.	Enter the smaller of the amount from line 5
or 6. This is your Indiana NOL deduction..

*24100000000*
24100000000

Instructions for Schedule IT-40NOL and Carryforward Worksheet
A separate Schedule IT-40NOL must
be used for each loss year.

of the loss in 2009. He has a $25,000 loss
available to be carried to tax year 2011.

Indiana Code 6-3-2-2.5 and 6-3-2-2.6 allow
for a net operating loss (NOL) deduction
from Indiana adjusted gross income. All loss
years ending after January 1, 2004, and any
existing NOL(s) carried over to a taxable
year after this date must be recomputed
by applying the amended provisions of
this Act. Deductions for net operating
losses that were incurred in taxable years
ending before January 1, 2004, and carried
back or forward and deducted in taxable
years ending before January 1, 2004, are
calculated under the law in effect for the
year the NOL was incurred.

Indiana NOLs may be carried forward for
up to 20 years following the loss year
(HEA 1316-2018(ss), Sec. 5). Note. If you
potentially had a net operating loss for
2018 through 2021, please see the specific
modifications for Line 2 related to those
years and later.

For tax years 2021 and later, itemized
deductions are not permitted in determining
Indiana net operating losses. In addition, if
you have a net operating loss carryforward
that was calculated in whole or in part using
an itemized deduction, you must recalculate
the net operating loss without the itemized
deduction in order to determine the amount
to be carried forward.
Important: In order to carry a pre2004 Indiana NOL to tax year 2004
and beyond, you must:
Step 1 – refigure the NOL using
the new method on Form IT-40NOL
revised R3/ 10-04, or after;
Step 2 – reduce the refigured NOL by
any amount previously used in any
pre-2004 intervening year;*
Step 3 – use any remaining NOL on
line 17 of Carryforward Worksheet 2.
* The application of the NOL in the pre2004 tax year(s) must conform with the
rules that govern those years. Do not
refigure the amount of deduction used in
the pre-2004 tax years.

When to use an Indiana NOL
Carryback and carryforward years.
Public Law 172-2011 amends IC 6-3-22.5 and IC 6-3-2-2.6. It provides that no
Indiana net operating loss carryback claim
may be filed after Dec. 31, 2011.
Example. Paul has an Indiana NOL for the
2010 tax year. Paul did not file an Indiana
NOL carryback claim before Jan. 1, 2012.
Therefore, he will have to carry the loss
forward.
Note. This rule will have no impact on
carryback claims filed before Jan. 1, 2012.
Example. Ross has a $200,000 Indiana
NOL for the 2010 tax year. In October
of 2011 he carried this loss back to his
2008 and 2009 Indiana returns. He used
$75,000 of the loss in 2008, and $100,000

Part 1 – Computation of Indiana NOL
Enter the loss year (this is the year in
which the NOL occurred).
P.L. 81-2004, effective January 1, 2004,
provides for an NOL deduction from
Indiana adjusted gross income equal to the
amount of a federal NOL, computed under
IRC Section 172, for the taxable year,
that is derived from sources from within
Indiana, and adjusted for modifications
under IC 6-3-1-3.5. The federal NOL for
individuals, which reflects the IRC Section
172 application, is computed on federal
Schedule A from Form 1045.
Note. The use of Indiana modifications
may result in an Indiana net operating loss
even if there is no federal NOL.
Line 1 – Full-year Indiana residents
You must complete Schedule A from
federal Form 1045 before figuring your
Indiana net operating loss (NOL). If the
amount on the last line of Schedule A,
computed without itemized deductions, is:
•	 negative (a loss), enter that amount
here as a negative figure;
•	 zero*, enter zero here; or
•	 positive*, enter that amount here as a
positive figure.
* Due to the application of Indiana
modifications, it is possible to have an
Indiana NOL without first having a federal
NOL as computed under IRC Section 172.
If you think you have an Indiana NOL after
the application of Indiana modifications,
then you must first complete Schedule A of
the Form 1045 to arrive at the amount to
be entered on this line.
Full-year and part-year Indiana
nonresidents
Apply like kind modifications (as computed
under IRC Section 172) derived from
Indiana sources to the amount from line
1 of Form IT-40PNR, and enter the result
here. If the modified amount from line 1 of
Form IT-40PNR is:
•	 negative (a loss), enter that amount
here as a negative figure;
•	 zero, enter zero here; or
•	 positive, enter that amount here as a
positive figure.
Line 2 – Certain Indiana modifications as
reported on the loss year IT-40/IT-40PNR
1

should be reflected here.
Important: Full-year and part-year Indiana
nonresidents who file Form IT-40PNR for
tax year 2008 or before should skip line 2
and continue to line 3.
Net the following Indiana add-backs as
reported on the loss year’s return.
For tax years 2003 and beyond (tax years
2009 and beyond for IT-40PNR filers), add:
•	 Tax add-back
•	 Net operating loss carryforward
•	 Lump sum distribution
•	 Section 179 expense
•	 Bonus depreciation
For tax years 2009 and beyond, add:
•	 Unemployment compensation (2009
only)
•	 Deferral of business indebtedness
discharge and reacquisition
•	 Qualified disaster assistance property
•	 Qualified refinery property
•	 Qualified restaurant property
•	 Qualified film or television production
•	 Qualified preferred stock
•	 Qualified retail improvement property
For tax years 2010 – 2012, add:
•	 Educator expense
•	 Employer-provided educational
expenses**
•	 IRA charitable distribution**
•	 Qualified transportation fringe
expenses**
•	 Student loan interest**
•	 Tuition and fees**
For tax years 2010 and beyond, add
•	 Discharge of debt of a principal
residence
•	 Motorsports entertainment complex**
•	 Qualified advance mining safety
equipment**
•	 Qualified environmental remediation
costs**
•	 Qualified leasehold improvement
property**
•	 Start-up expenditures**
Do not include the following add-backs for
tax years 2010 and beyond:
•	 Domestic production activities
•	 Oil and gas well depletion deduction
•	 Qualified electric utility amortization
•	 RIC dividends to nonresident aliens
**Apply these if 2010 is the loss year.
While these add-backs were first required
for the 2010 tax year, individuals were
given a choice to report them on either
their 2010 or their 2011 Indiana tax return.

Therefore, if 2010 is the loss year, include
on line 2 only those add-backs that were
reported on the 2010 tax return.
For tax year 2011 and beyond, add:
•	 Certain trade or business deductions
based on employment of unauthorized
alien
For tax year 2012 and beyond, add:
•	 OOS municipal obligation interest
Note. In 2013 the following add-backs
were deemed to be no longer required,
retroactive to 2012:
•	 IRA charitable distribution
•	 Motorsports entertainment complex
•	 Qualified advance mining safety
equipment
•	 Qualified leasehold improvement
property
•	 Qualified restaurant property
•	 Qualified retail improvement property
•	 Qualified transportation fringe expenses
•	 Tuition and fees
If you reported any of the above on your
2012 tax return, and you utilized Option 2
to report them as a negative add-back on
your 2013 return (using a 300-series 3-digit
code number in lieu of filing an amendment
for 2012), do not include these amounts on
line 2 when 2013 is the loss year.
Do not include the following add-backs for
tax years 2016 and beyond:
•	 Certain trade or business deductions
based on employment of unauthorized
aliens
•	 Lump sum distribution
•	 Discharge of debt of a principal
residence
For tax years 2017 and beyond, add:
•	 Deduction under IRC 965(c) allowable
for untaxed foreign earnings and
profits (repatriated dividends)
For tax years 2018 and beyond, add:
•	 Excess federal interest (under IRC
Section 163(j))
•	 Excess business losses permitted
for federal purposes but not Indiana
purposes (2018-2020 only)
For tax years 2020 and beyond, add:
•	 Charitable contributions deductions
claimed by individuals in determining
federal AGI (2020 only)
•	 Student loan payments made by
an employer and excluded from
federal gross income, net of interest
that would have been permitted for
federal purposes absent the federal
exclusions

•	

Unemployment excluded from federal
gross income (2020 only)

For tax years 2021 and later, add:
•	 Student loan debt discharged under
IRC section 108(f)(5) except “those
excluded as a result of death, total and
permanent disability, or bankruptcy.
•	 50% of certain meals deducted in
determining AGI
For tax years 2022 and later, subtract:
•	 Indiana education scholarship account
deduction
•	 Indiana enrichment scholarship
account deduction
Line 3 – If any amount of loss from this loss
year has been carried to a preceding year,
enter as a positive amount the amount of
loss used in that preceding year(s).
Example. Ross has a $200,000 Indiana
NOL for the 2010 tax year. He previously
carried this loss back to his 2008 and
2009 Indiana returns. He used $75,000
of the loss in 2008, and $100,000 of
the loss in 2009. He must enter the
$175,000 ($75,000 plus $100,000) net loss
previously carried back.
Note. Do not include on this line any loss
amount previously carried forward.
Example. Olivia has a $100,000 Indiana
NOL for the 2009 tax year. She previously
carried $10,000 of this loss back to her 2007
return, $11,000 to her 2008 return, and used
$19,000 of the loss on her 2010 return.
She must enter the $21,000 ($10,000 plus
$11,000) net loss previously carried back.
Line 5 – Enter the net of the following
Indiana deductions as claimed on the loss
year’s return:
•	 Non-Indiana locality earnings deduction
•	 State tax refund and/or other
recovered itemized deductions
•	 Interest from U.S. government
obligations
•	 Social Security and/or benefits issued
by the U.S. Railroad Retirement Board
•	 Qualified patent income exemption
•	 National Guard and reserve
component member’s deduction
•	 Nonresident military spouse earned
income deduction
•	 Government or civic group capital
contribution deduction
•	 COVID-related ERC expense deduction
•	 Indiana education scholarship account
grant deduction
•	 Indiana enrichment scholarship account
deduction
•	 Student loan interest deduction
for interest paid from student loan
payments required to be added back
Line 6 – Subtract line 5 from line 4. If the
amount is zero or greater, enter zero.
2

Line 7 – For taxable years beginning
in 2021 and later, enter as a negative
amount the amount of excess business
losses for the taxable year disallowed for
federal purposes under IRC section 461
(any negative amount shown on federal
Form 461, Line 16, for the loss year) but
permitted to be carried forward as a net
operating loss in future taxable years.
For taxable years 2018 through 2020, enter
the amount of excess business losses
disallowed for Indiana adjusted gross
income tax purposes. If you are a part- or
full-year nonresident, enter the portion of
such losses attributable to Indiana sources.
Any Indiana excess business loss should
be reported in a manner consistent with
how your adjusted gross income from
Indiana sources was reported.
However, in no case should the Indiana
loss be greater than the federal excess
business loss reported for federal purposes.
Further, in no case should the Indiana loss
reported in adjusted gross income plus the
disallowed portion permitted as an Indiana
NOL carryforward exceed the Indiana
loss determined without regard to the loss
disallowance.
Line 8 – Add lines 6 and 7. If the amount is
zero or greater, STOP. You do not have an
Indiana NOL. If the amount is a loss, enter
(as a positive entry) this amount on line
6, Column A, of the Schedule IT-40NOL
Carryforward Worksheet.

Part 2 – Record of Indiana NOL
Application
Column 1 – List the year(s) to which you
are carrying the loss.
Column 2 – Enter the amount of Indiana
AGI available to be offset from line 5 of the
completed Carryforward Worksheet.
Column 3 – Enter as a positive amount
the Indiana NOL available for deduction
from line 6 of the completed Carryforward
Worksheet.
Column 4 – Enter the amount from
either line 7 or line 8 of the Carryforward
Worksheet (only one of those lines will
have an entry).
Column 5 – Enter the amount from line 9
of the completed Carryforward Worksheet.
This is your Indiana NOL deduction. Enter
on IT-40 Schedule 1 (Schedule 2 for the
2009 tax year and beyond), under line 11,
or IT-40PNR Schedule B (Schedule C for
the 2009 tax year and beyond), under line
11. If carrying the loss forward to a tax year
which has already been filed, enter the
amount on Form IT-40X, line 1, Column B.

Schedule IT-40NOL Carryforward
Worksheet Instructions

A Carryforward Worksheet must be
completed for each loss year.
If you are carrying your loss forward for more
than five years, modify the top of the column
to show the year to which it is being carried.
Example. Modify Column A, ‘1st’ following
year, to read ‘6th’ following year.
Before you begin
You must have a completed state tax
return (not including the Indiana NOL
deduction) for the intervening year(s) in
which you are applying the loss.
Columns A – E. Enter in Column A
information from the first year following the
loss year. Enter in Column B information
from the second year following the loss
year. Complete the remaining columns
accordingly.
Example. The loss year is 2009. Column
A should reflect information from tax year
2010; Column B should reflect information
from tax year 2011, and so on.
Intervening year. Year to which a loss is
being carried.
Complete lines 1 through 5 of the
Carryover Worksheet to figure the
intervening year’s Indiana AGI.
Line 1 – Enter the amount from line 1 of
the intervening year’s IT-40 or IT-40PNR.
Note. If reporting from the IT-40PNR for
tax year 2008 or before, skip line 2 and
enter this amount on line 3.
Line 2 – Net the following Indiana
addbacks as reported on the intervening
year’s return.
For tax years 2003 and beyond (tax years
2009 and beyond for IT-40PNR filers), add
the modifications applicable for the taxable
year. See the instructions for Line 2 of the
IT-40NOL for a list of modifications.

Line 3 – Add lines 1 and 2 and enter the
result here.
Line 4 – Enter the net of certain
deductions as claimed on the intervening
year’s return. See the instructions for
Line 5 of the IT-40NOL for a list of the
deductions.
•	 Non-Indiana locality earnings
deduction
•	 Homeowner’s residential property tax
deduction
•	 State tax refund and/or other
recovered itemized deductions
•	 Interest from U.S. government
obligations
•	 Social Security and/or benefits issued
by the U.S. Railroad Retirement Board
•	 Indiana partnership long-term care
policy premiums deduction
•	 Human services deduction
•	 Qualified patent income exemption
•	 National Guard and reserve
component member’s deduction
•	 Nonresident military spouse earned
income deduction
•	 Total exemptions claimed (after
proration, if applicable)
•	 Government or civic group capital
contribution deduction
Line 5 – Intervening year’s Indiana AGI.
Subtract line 4 from line 3 (if less than
zero, enter zero).
Line 6 – NOL available for carryforward.
Enter here the amount from Schedule IT40NOL, Part 1, line 8 (enter as a positive
amount).
•	 If this is the first time the NOL from
Schedule IT-40NOL, Part 1, line 8, is
being used, then enter the full amount
here.
•	 If you have already used the NOL
from Schedule IT-40NOL, Part 1, line
8, to offset income, then enter the
remaining available loss here (from
line 8 of the Carryforward Worksheet).
See line 8 instructions.

If you reported any of the above on your
2012 tax return, and you utilized Option 2
to report them as a negative add-back on
your 2013 return (using a 300-series 3-digit
code number in lieu of filing an amendment
for 2012), do not include these amounts on
line 2 when 2013 is the intervening year.

3

Complete line 7 OR line 8 based on the
following:
•	 If line 5 is greater than line 6,
complete line 7.
•	 If line 6 is greater than line 5,
complete line 8.
Line 7 – If the line 5 intervening year’s
Indiana AGI is greater than or equal to the
line 6 NOL available for carryforward, then
you will use all of the available NOL as a
deduction. Subtract line 6 from line 5 and
enter the difference here. Skip line 8 and
complete line 9.
Line 8 – If the line 6 NOL available for
carryforward is greater than the line 5
intervening year’s Indiana AGI, then you
will be able to offset the entire intervening
year’s Indiana AGI and have a reduced NOL
available to carry to other years. Subtract
line 5 from line 6 and enter the difference
here and on line 6 in the next column.
Line 9 – Enter the smaller of the amount
on line 5 or line 6. This is your Indiana
NOL deduction. Enter on IT-40 Schedule
1 (Schedule 2 for the 2009 tax year and
beyond), under line 11, or IT-40PNR
Schedule B (Schedule C for the 2009 tax
year and beyond), under line 11. If carrying
the loss forward to a tax year which has
already been filed, enter the amount on
Form IT-40X, line 4, Column B.