461-K: Kentucky Limitation on Business Losses (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
Kentucky Form 461-K calculates excess business loss for 2025 and is enclosed with Form 740 or 740-NP. It reports income and losses adjusted for Kentucky/federal differences, removes amounts not attributable to a trade or business, and applies the business loss limitation.
Who files this form
Use Form 461-K for tax year 2025 if you are an individual taxpayer whose net losses from trades or businesses are more than:
- $313,000, or
- $626,000 if you are married filing jointly or married filing separately on a combined return.
The form calculates your excess business loss.
What you'll need
Have the return information used to complete Form 461-K:
- Your Form 740 or 740-NP, including the names shown on page 1 and your Social Security number.
- For Form 740 filers, Schedule 1 (Form 1040), lines 3 through 6, and Form 1040 or 1040-SR, line 7. The instructions also identify applicable amounts from Form 1040-NR or Form 1041.
- For Form 740-NP filers, page 4, Column B, lines 7, 8, 9, 11, and 12.
- Information about Kentucky/federal differences and any other trade or business income, gains, or losses reported on your return.
- Amounts included in Part I that are not from a trade or business, for the adjustments in Part II.
How to file
Enclose Form 461-K with your Form 740 or 740-NP.
If line 16 is less than zero, report that amount as a positive number on:
- Form 740, Schedule M, line 5, or
- Form 740-NP, page 4, line 16, Column B.
The supplied text does not give a mailing address or e-file directions.
Common mistakes
Keep these printed directions in mind:
- Modify income and loss amounts for Kentucky/federal differences where directed. Nonresidents and part-year residents use the applicable Form 740-NP amounts.
- Enter the losses or deductions on line 11 as a positive number.
- Reverse the sign of line 12 when entering it on line 13: a negative becomes positive, and a positive becomes negative.
- If line 16 is negative, report the excess business loss adjustment as a positive number on the applicable Kentucky return line.
- Enclose Form 461-K with Form 740 or 740-NP.
Questions people ask
What is an excess business loss?
It is the amount by which total deductions from your trade or business exceed your total gross income or gains plus the threshold amount. For 2025, the threshold is $313,000, or $626,000 for married taxpayers filing jointly or married filing separately on a combined return.
What counts as a trade or business?
Your primary purpose must be income or profit, and you must participate with continuity and regularity. The facts and circumstances determine whether an activity qualifies. You do not have to make a profit, but you need a profit motive and ongoing efforts to further your business interests.
How do I handle amounts that are not from a trade or business?
Use Part II to adjust for amounts included on lines 1 through 8 that are not from a trade or business. Report income or gains on line 10 and losses or deductions on line 11. Enter line 11 as a positive number.
What happens to my excess business loss?
The instructions say that each year's excess business loss is treated as a net operating loss carryover. Enter that amount on Schedule KNOL.