Schedule KNOL is used to calculate a Kentucky Net Operating Loss, claim a deduction for prior-year Kentucky losses, and determine any loss that can be carried forward to future years. If you're unsure whether you have a Kentucky NOL carryforward, review your prior-year Kentucky return and Schedule KNOL before completing this section.
What Is a Kentucky Net Operating Loss (NOL)?
A Kentucky Net Operating Loss (NOL) generally occurs when your business deductions are greater than your business income for the year. If you have a Kentucky NOL, you may be able to use the loss to reduce your Kentucky taxable income in future years. Kentucky has its own NOL rules, which may differ from the federal rules. Net operating losses generated on or after January 1, 2018, are generally limited to 80% of Kentucky taxable income, and any unused loss may be carried forward indefinitely.
Schedule KNOL is used to:
- Calculate a current-year Kentucky NOL.
- Determine how much of a prior-year Kentucky NOL can be used this year.
- Calculate any Kentucky NOL that can be carried forward to future tax years
When Do I Need to Complete Schedule KNOL?
Complete Schedule KNOL if you:
- Are claiming a Kentucky Net Operating Loss deduction on your current Kentucky return.
- Have a Kentucky NOL carryforward from a prior year.
- Need to calculate a Kentucky NOL from the current year that may be carried forward to future years.
Where Do I Enter This in the Program?
Kentucky Return > Subtractions from Income > Kentucky Net Operating Loss, Schedule KNOL
Where Do I Find This Information?
You may need information from:
- Prior-year Kentucky Schedule KNOL forms.
- Prior-year Kentucky tax returns.
- Business records.
- Federal tax forms that report business income, gains, losses, and deductions.
If you are entering a carryforward amount, refer to your prior-year Kentucky Schedule KNOL or your Kentucky tax records.
What Information Do I Need to Enter?
Select Who the KY KNOL Is For
If you're filing a joint return, select whether the Kentucky NOL belongs to the Taxpayer or Spouse.
Kentucky tracks NOLs separately for each individual, so choose the person who incurred the loss or owns the carryforward.
Not sure what to enter?
Most taxpayers will already have these amounts from a prior-year Kentucky Schedule KNOL, Kentucky tax records, or business tax workpapers. If a field does not apply to your situation, leave it blank.
Part I, Section A - Adjustments to Current Year NOL
Complete this section if you had a business loss during the current tax year and need to determine whether you have a Kentucky NOL available to carry forward.
Depending on your situation, enter:
Nonbusiness Capital Losses
Enter personal capital losses that are not related to a business, such as losses from the sale of stocks or investment property.
Nonbusiness Capital Gains
Enter personal capital gains that are not related to a business, such as gains from the sale of stocks or investments.
Nonbusiness Deductions
Enter deductions that are not connected to a trade or business.
Nonbusiness Income (Other than Capital Gains)
Enter income that is not related to a business and is not a capital gain.
Business Capital Losses
Enter capital losses from assets used in a trade or business.
Business Capital Gains
Enter capital gains from assets used in a trade or business.
Section 1202 Exclusion Amount
Enter any gain excluded under Internal Revenue Code Section 1202 for qualified small business stock, if applicable.
These entries are used to calculate your current-year Kentucky NOL.
Part I, Section B - NOL Carryforward Calculation
If you have Kentucky NOLs from prior years, enter any applicable carryforward amounts:
Pre-2024 NOL Carryforward
Enter any unused Kentucky NOL carryforward from tax years before 2024. This amount is typically found on your prior-year Kentucky Schedule KNOL.
Post-2023 NOL Carryforward
Enter any unused Kentucky NOL carryforward from tax years after 2023.
Excess Business Losses
Enter any Kentucky excess business loss amount carried forward from a prior year.
The program uses this information to determine the total Kentucky NOL available for the current year.
Part II - Net Operating Loss Deduction
Complete this section if you're claiming a Kentucky NOL deduction from a prior-year carryforward.
Enter:
Pre-2024 NOL Carryforward
Enter the pre-2024 Kentucky NOL amount available to use on this year's return.
Post-2023 NOL Carryforward
Enter the post-2023 Kentucky NOL amount available to use on this year's return.
The program calculates the allowable Kentucky NOL deduction that can be used on this year's return.
Part III - Kentucky NOL Carryforward
This section determines whether you have any Kentucky NOL remaining after applying the current-year deduction.
If applicable, enter:
Excess Business Losses
Enter any excess business losses that remain available to carry forward to future years.
The program calculates any unused Kentucky NOL that may be carried forward to future tax years.
What Happens Next?
After Schedule KNOL is completed, the program:
- Calculates your allowable Kentucky NOL deduction for the current year.
- Determines any Kentucky NOL remaining for future years.
- Transfers the allowable deduction to Kentucky Schedule M, Line 16.
Important
- Only complete the fields that apply to your situation. Many taxpayers will only enter prior-year carryforward amounts or calculate a current-year NOL if they experienced a business loss during the year.
- Kentucky NOLs generated on or after January 1, 2018, are generally limited to 80% of Kentucky taxable income before the NOL deduction is applied.
- Unused Kentucky NOLs may be carried forward indefinitely.
- Taxpayers claiming a Kentucky NOL deduction must complete Schedule KNOL.
- If the loss occurred during the current tax year, complete Part I to calculate the amount available for future carryforward.
- Keep a copy of Schedule KNOL and all supporting records with your tax documents.