Schedule KNOL: Kentucky Net Operating Loss Schedule (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
Schedule KNOL is Kentucky’s Net Operating Loss Schedule for individuals, estates and trusts. It calculates a current-year net operating loss or a deduction for prior-year losses, along with loss amounts carried forward to future years. Enclose it with Form 740, Form 740-NP or For
Who files this form
Schedule KNOL is for individuals, estates, and trusts calculating a Kentucky net operating loss (NOL) or net operating loss deduction.
- Use Part I if you have a current-year loss to calculate your Kentucky NOL and the amount carried forward.
- Use Part II if you have positive taxable income and an NOL carryforward from prior years to calculate 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 return: Form 740, Form 740-NP, or Form 741, with the name and identification number shown on the return.
- Income and deduction details: Business and nonbusiness capital gains and losses, nonbusiness deductions, and nonbusiness income.
- Schedule D: Federal Form 1040, Schedule D, or Form 741, Schedule D, for the loss amounts requested in Part I.
- Kentucky Schedule M: For applicable adjustments and the net operating loss deduction.
- Federal or Kentucky Form 461: If you are subject to the excess business loss limitation.
- Prior-year NOL records: Keep pre-2018 and post-2017 carryforwards separate. For Part II, attach statements showing the original NOL and the amounts used in each prior year.
How to file
Enclose your completed Schedule KNOL with Form 740, Form 740-NP, or Form 741.
If you claim a deduction through Part II:
- Form 740 filers: Enter the deduction from Part II, Section A, line 8 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 statements showing the original NOL and the amounts used in each prior year.
Common mistakes
- Completing the wrong part: If Part I, Section A, line 3 is zero or more, do not complete Part I, Section A or B. Continue to Part II if you have a prior-year NOL carryforward.
- Treating a nonnegative result as a loss: If Part I, Section A, line 26 is zero or more, you do not have a current-year NOL.
- Using Part II with a current-year NOL: The form says not to complete Part II in that situation. If Part II, Section A, line 3 is negative, stop and complete Part I.
- Including old carryforwards in taxable income before the deduction: Part II, Section A, line 3 must exclude NOL carryforwards from prior years.
- Omitting prior-year statements: Part II requires statements showing the original NOL and the amounts used each prior year.
- Entering an excess business loss when Form 461 does not show one: If federal or Kentucky Form 461, line 16 is zero or greater, enter zero for the excess business loss amount.
Questions people ask
How long can I carry a Kentucky NOL forward?
Losses generated for a taxable year 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. The 2025 schedule calculates carryforwards to 2026.
Does the 80% limit apply to every NOL?
No. Pre-2018 losses are not subject to the 80% limit. For post-2017 losses, Part II first subtracts the pre-2018 deduction from taxable income, then calculates 80% of the remaining taxable income as the maximum post-2017 deduction.
Can I carry a Kentucky NOL back to an earlier year?
No carryback is allowed for tax years beginning on or after January 1, 2005.
What is the excess business loss limit for tax year 2025?
The instructions state that losses from trades or businesses of noncorporate taxpayers are limited to $313,000, or $626,000 for married taxpayers. The applicable excess business loss amount is treated as an NOL carryforward.