Schedule KNOL: Kentucky Net Operating Loss Schedule (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
Kentucky Schedule KNOL is used by individuals, estates, and trusts to calculate a current-year Kentucky net operating loss or a net operating loss deduction. It also calculates loss amounts carried forward to future years and is enclosed with Form 740, Form 740-NP, or Form 741.
Who files this form
Schedule KNOL is for individuals, estates, and trusts calculating a Kentucky net operating loss (NOL) or net operating loss deduction for 2024.
- Use Part I if you have a current-year net operating loss. It calculates the loss and the amount carried forward to future years.
- Use Part II if you have positive taxable income and an unused net operating loss from a prior year. It calculates your deduction and remaining carryforward.
Enclose Schedule KNOL with Form 740, Form 740-NP, or Form 741.
What you'll need
Have the following available, as applicable:
- Your Kentucky Form 740, Form 740-NP, or Form 741, and Kentucky Schedule M.
- Amounts for business and nonbusiness income, deductions, capital gains, and capital losses.
- Federal Form 1040, Schedule D, or Form 741, Schedule D, for the capital loss entries.
- Records of unused NOL carryforwards, separated into losses occurring before January 1, 2018, and losses occurring on or after that date.
- Federal Form 461 or a “Kentucky” Form 461 if you are subject to the excess business loss limitation.
For Part II, attach statements showing the original net operating loss and the amounts used in each prior year.
How to file
Enter your name exactly as shown on your tax return and your Social Security number or federal identification number. Enclose Schedule KNOL with Form 740, Form 740-NP, or Form 741.
If you calculate a deduction in Part II, Section A, line 8:
- Form 740 filers: Enter it on Kentucky Schedule M, line 16.
- Form 740-NP filers: Enter it on Form 740-NP, page 4, Column B, line 16, and label it “NOLD.”
Attach the required prior-year loss statements when completing Part II.
Common mistakes
- Using the wrong part: Part I is only for a current-year loss. Do not complete Part II if you have a current-year net operating loss. If Part II, Section A, line 3 is negative, stop and complete Part I.
- Continuing Part I when line 3 is zero or positive: Do not complete Part I, Section A or B. Continue to Part II if you have a prior-year NOL carryforward.
- Treating a zero or positive line 26 as a loss: If Part I, Section A, line 26 is zero or more, you do not have a current-year net operating loss.
- Including old losses in taxable income before the deduction: Part II, Section A, line 3 must exclude prior-year NOL carryforwards.
- Forgetting supporting statements: Attach statements showing the original NOL and the amounts used in each prior year.
- Entering an excess business loss when Form 461 does not show one: If line 16 of federal or “Kentucky” Form 461 is zero or greater, enter zero for the excess business loss.
Questions people ask
How long can I carry a Kentucky net operating loss forward?
Losses generated for tax years beginning before January 1, 2018, may be carried forward for 20 years following the loss year. Unused losses generated on or after January 1, 2018, may be carried forward indefinitely.
Is there a limit on the deduction for newer losses?
Yes. Post-2017 losses are subject to an 80% limitation. Part II first applies the pre-2018 deduction, then calculates 80% of the remaining taxable income as the maximum allowable post-2017 deduction. Pre-2018 losses are not subject to the 80% limitation.
Can I carry a Kentucky net operating loss back to an earlier year?
No. Kentucky does not allow NOL carrybacks for tax years beginning on or after January 1, 2005.
What is the excess business loss limit for 2024?
For tax year 2024, losses from trades or businesses of noncorporate taxpayers are limited to $305,000, or $610,000 for married taxpayers. The excess business loss amount entered on Schedule KNOL is treated as an NOL carryforward.