Schedule MI-1045: Net Operating Loss (2024)
Michigan · Michigan Treasury · Used for tax years 2024
Michigan Schedule MI-1045 computes your Michigan net operating loss (NOL) using adjusted gross income, Michigan additions and subtractions, and required modifications. It is filed with the tax return for the loss year.
Who files this form
Use Schedule MI-1045 to determine whether you have a Michigan net operating loss (NOL) for the loss year, even if you do not have a federal NOL. File it with your loss-year Michigan return.
Nonresidents and part-year residents may also qualify. Only Michigan-sourced income or loss may create a Michigan NOL.
Before claiming an NOL carryforward deduction, you must complete Schedule MI-1045 for the loss year or years and Form 5674. If you amend a loss-year MI-1040 and change your NOL, include an amended MI-1045 and supporting documentation.
What you'll need
Use your loss-year Michigan MI-1040 and Michigan Schedule 1 to complete Part 1. Use the Michigan portion of your loss-year U.S. Form 1040 entries to complete Part 2.
The supporting-document checklist lists:
- U.S. Form 1040 and Schedules 1, A, B, C, D, E and F.
- U.S. Forms 4797 and 4835.
- U.S. Form 1045, Schedule A.
- Schedule K-1s.
- MI-1041 and the final Schedule K-1 from U.S. Form 1041 when the NOL comes from the termination of a trust.
- For all business activity, a statement showing the type and location, including city and state, of each source of income or loss.
- Any other applicable documents supporting the NOL.
Treasury’s website has a “Business, Rental & Royalty Activity Worksheet” to help with the business activity statement.
How to file
File Schedule MI-1045 with your loss-year Michigan return, including an e-filed return. The supplied text does not give a mailing address.
- Type or print in blue or black ink. Enter the loss year, your name and full Social Security number, plus your spouse’s information if filing jointly.
- Complete Part 1 using your loss-year MI-1040 and Michigan Schedule 1.
- If line 14 is zero or greater, stop. You do not have a Michigan NOL.
- Complete Part 2 before entering the modifications on lines 15 through 17. Carry line 30 to line 15.
- Combine lines 14 and 18 on line 19. If the result is zero or greater, you do not have a Michigan NOL.
- Include the required supporting documents.
To claim a carryforward deduction, use Form 5674 and claim the deduction on Michigan Schedule 1. To request a refund from a farming loss carryback, use Form 5603.
Common mistakes
- Checking the farming carryback waiver without understanding it. Checking line 1 gives up the entire farming NOL carryback period and carries the loss forward instead. The election is irrevocable.
- Continuing after line 14 is zero or greater. The form says to stop because you do not have a Michigan NOL.
- Skipping Part 2. Complete it before continuing with the modifications in Part 1.
- Skipping years when claiming an NOL. An NOL must be claimed in consecutive years.
- Using the wrong place for a nonresident or part-year resident deduction. Do not report the Michigan NOL deduction on Schedule NR or claim the federal NOL deduction as an addition on Michigan Schedule 1.
- Amending MI-1040 to request a farming carryback refund. Use Form 5603 instead.
- Leaving out supporting documents. The instructions remind filers to include them to help reduce processing delays.
Questions people ask
What is a net operating loss?
An NOL occurs when business loss exceeds income in a particular year. Schedule MI-1045 applies the required Michigan adjustments to determine whether you have a Michigan NOL.
Is my Michigan NOL the same as my federal NOL?
Not necessarily. Michigan calculates its NOL independently, starting with federal adjusted gross income rather than federal taxable income. Federal standard or itemized deductions are not considered in the Michigan NOL calculation.
Does Schedule MI-1045 claim my current-year NOL deduction?
No. Schedule MI-1045 computes the loss. Form 5674 computes the current-year Michigan NOL deduction and is required to claim that deduction on Michigan Schedule 1.
Can a 2024 NOL be carried back or forward?
Most NOL carrybacks are eliminated for losses incurred after 2020. These losses may be carried forward indefinitely until fully absorbed. Farming NOLs have a two-year carryback option.
Is there a limit on the deduction for a 2024 NOL?
Yes. A 2024 loss is a Group 2 TCJA NOL. These NOL deductions are limited to 80 percent of Michigan taxable income before exemptions and previously claimed NOL deductions.