5674: Net Operating Loss Deduction (2024)
Michigan · Michigan Treasury · Used for tax years 2024
Michigan Form 5674 calculates your 2024 net operating loss (NOL) deduction from available Group 1 and Group 2 losses. The calculated amount is reported on Michigan Schedule 1, and both forms are included with Form MI-1040.
Who files this form
You must complete Form 5674 if you claim a Michigan net operating loss (NOL) deduction on Michigan Schedule 1 for 2024.
The form calculates your deduction from available Group 1 and/or Group 2 NOLs. Include both Form 5674 and Schedule 1 with your MI-1040.
What you'll need
Have these forms and records ready:
- MI-1040 and Michigan Schedule 1. Form 5674 uses your adjusted gross income from MI-1040, line 10, and your additions and subtractions from Schedule 1, lines 9 and 29.
- Schedule MI-1045 and supporting documents for each loss year. Include them if they have not already been provided to the Michigan Department of Treasury for that loss year.
- A schedule showing how your Michigan NOL was absorbed. The instructions point to an NOL carryforward worksheet on Treasury’s website for help.
- Recalculation details, if applicable. If you check the box on line 1 because your filing or marital status changed, provide the calculation showing how you redetermined your Michigan NOL and/or Michigan income subject to tax. If you must recompute your income subject to tax, include a statement identifying your items of income or loss in adjusted gross income, with the type and location of each item.
Keep records supporting an NOL for 6 years after it expired or was absorbed.
How to file
- Type or print in blue or black ink.
- Complete Form 5674 and include it with your 2024 MI-1040 and Michigan Schedule 1.
- Enter the amount from Form 5674, line 11 or line 12, as applicable, on Schedule 1, line 30.
- Include the required NOL supporting documents and calculations.
The supplied text does not give a mailing address or e-filing directions.
Common mistakes
- Leaving out supporting documents. All NOL deductions must be supported by Schedule MI-1045. The instructions say to review the required documents to help reduce processing delays.
- Missing a filing or marital status change. Check line 1 if either changed in any year since the NOL was created, and follow the recalculation instructions.
- Using the wrong signs. Enter Group 1 and Group 2 NOLs on lines 2 and 3 as positive numbers. Enter Schedule 1 subtractions on line 6 as a negative number.
- Completing both lines 11 and 12. The form says not to complete line 12 when completing line 11.
- Skipping carryforward years. Report the NOL carryforward in consecutive years, including years without Michigan taxable income before exemptions.
- Including a current-year loss in the line 1 recalculation. The line 1 instructions say not to include a loss created in the current year.
Questions people ask
What is the difference between Group 1 and Group 2 NOLs?
Group 1 NOLs were created in 2017 or earlier and can be carried forward for 20 consecutive years following the loss year. Group 2 NOLs were created in 2018 or later and can be carried forward indefinitely. Group 2 also includes any applicable Michigan excess business loss from the previous year.
How is the Group 2 deduction limited on the 2024 form?
Line 8 calculates 80% of the income subject to tax before the Michigan NOL deduction shown on line 7. Line 9 limits the allowable Group 2 NOL to the smaller of that amount or the Group 2 NOLs on line 3.
What if my income before the Michigan NOL deduction is zero or less?
The instructions say there is no income to offset with an NOL deduction. Line 12 combines Group 1 and Group 2 NOLs to report the carryforward. After required modifications, unused NOLs remain combined within their respective groups.
Can a change in filing or marital status affect my deduction?
Yes. If your filing or marital status changed in any year since the NOL was created, your allowed deduction may be affected. Check line 1. The instructions direct you to IRS Publication 536 to determine your share of the Michigan NOL and/or recompute your Michigan income subject to tax.