Nebraska Individual Income Tax Net Operating Losses - Instructions (Page 2 of 5) in pdf

The Nebraska Form NOL requires you to make adjustments in-

of Forms 1040XN-2004, 1040XN-2003, 1040XN-2002,

creasing or decreasing federal adjusted gross income (AGI). In

1040XN-2001, 1040XN-5 or 1040XN-4, or line 15 of

addition, differences can arise because Nebraska non-business

Forms 1040XN-3 or 1040XN-2).

itemized deductions do not include state or local income taxes.

Deducting a Carryforward. If a Nebraska resident takes a

The instructions for Form NOL are on the back of the form.

Nebraska NOL deduction in a year following the year of loss, he

When to Use a Nebraska NOL

or she will report the loss deduction on Schedule I of Form 1040N.

The Nebraska NOL deduction will be entered as an adjustment

Individual taxpayers have the same NOL carryback and carryfor-

ward periods as are permitted for Federal NOLs. For NOLs occur-

decreasing federal AGI on Part B of Schedule I. Any federal NOL

which has been deducted on the federal return must be entered as

ring after 1997, generally the federal carryback period is two years

an adjustment increasing federal AGI on Part A of Schedule I.

while the carryforward period is twenty years. For NOLs arising

in tax years ending in 2001 or 2002, federal law has extended the

The taxpayer must attach a copy of the Nebraska Form NOL for the

general two-year carryback period to ﬁve years. For NOL’s oc-

year of the loss to the Nebraska return. An additional schedule or

curring before 1998, the federal carryback period is three years

statement should be attached if necessary to explain the deduction.

and the carryforward period is 15 years. Since 1998, a farming

If more than one Nebraska NOL deduction is taken in the same

loss may be carried back ﬁve years. (Code Sec. 172) The three-

year, attach a copy of the Form NOL for each loss year.

year carryback period is retained for the portion of the NOL that

Change in Marital Filing Status. If marital status changes

relates to casualty and theft losses of individual taxpayers and to

because of marriage, divorce, or death, or if married taxpayers

NOLs that are attributable to presidentially declared disasters in

change their ﬁling status (joint return or separate return), the special

the case of a small business or a farming business that elects to

rules used by the Internal Revenue Service must also be used to

forego the ﬁve-year carryback period for a farming loss (Code Sec.

compute a Nebraska NOL carryforward or carryback. See Federal

172(b)(1)(F)). See Federal Publication 536 for the exceptions to

Publication 536 for the applicable rules.

these periods. Any NOL which is unused after the last carryforward

period cannot be deducted.

Change in Resident Status. Special rules apply when the

residence status is different in the year of the NOL and the year the

The Nebraska NOL must be applied in the same manner as the

NOL is deducted. See “Change in Resident Status” on page 4.

federal NOL. If the federal loss is carried back to past years,

the Nebraska loss must also be carried back. If an election has

How to Calculate an NOL Carryover

been made to forego the entire carryback period for a federal NOL,

If your Nebraska NOL is more than the taxable income in the year

this election must be followed for Nebraska purposes. A copy of

you are deducting the NOL, you can then carry a portion of the

the federal election must be attached to the Nebraska return ﬁled

NOL to another year. This is called an NOL carryover. To compute

for the loss year.

the amount of the NOL carryover it is necessary to calculate the

If the Nebraska NOL occurs in a year when there is no federal

Nebraska modiﬁed taxable income for the year of deduction. This

NOL, the taxpayer will normally carry the loss back to the earliest

amount is then deducted from the Nebraska NOL to determine the

carryback year. The taxpayer, however, may make an election to

amount of Nebraska NOL carryover which is available.

forego the carryback period if a federal election would be permitted

Nebraska ModiﬁedTaxable Income. Nebraska modiﬁed tax-

under similar circumstances.

able income is computed in the same manner as federal modiﬁed

The election is made by attaching a statement to the Nebraska

taxable income except for certain adjustments. See Federal Publi-

return ﬁled in the loss year. Such return must be timely ﬁled (in-

cation 536 for a description of federal modiﬁed taxable income. If

cluding any extensions). If such an election is not made with the

Nebraska modiﬁed taxable income is computed for a carryback

return or the return is not timely ﬁled, the NOL must be carried

year, Schedule B of Federal Form 1045 is used. If the current year

back. Once made, an election cannot be changed.

return includes an NOL deduction from a prior year which reduces

How to Claim an NOL Deduction

Nebraska taxable income to zero, the worksheet for individuals

provided in Federal Publication 536 for the current year is used to

Deducting a Carryback. A Nebraska NOL is carried back to

determine the carryover to the subsequent year. It is necessary to

a prior year by ﬁling an amended Nebraska income tax return for

modify the entries on Schedule B and on the worksheet to compute

the prior year. The Form NOL for the year of the loss must be

the Nebraska NOL carryover.

attached to the amended return when ﬁled. Also attach a copy of

Schedule A (Federal Form 1045), and a copy of the Federal Form

Computing Nebraska NOL Carryover for Carryback

1040X or 1045 ﬁled for the carryback year.

Years. To compute the Nebraska NOL carryover where the

Nebraska NOL has been deducted in a carryback year, complete

An amended Nebraska individual income tax return for a loss

Schedule B of Federal Form 1045. However, the form must be

carryback must be ﬁled within three years after the due date, with

modiﬁed for Nebraska purposes based on the instructions listed

extensions, for ﬁling the return for the NOL year.

below. It may also be necessary to complete the Itemized Deduc-

An NOL deduction is entered on an amended return in the fol-

tions Limitation Worksheet which is contained in the instructions

lowing manner: Any federal NOL which has been deducted in

for Form 1045. For years 1993 and later, this worksheet must also

determining federal AGI is entered as an adjustment increasing

be modiﬁed for Nebraska purposes.

federal AGI (line 12 of Forms 1040XN-2004, 1040XN-2003,

Nebraska Modiﬁcations to Schedule B (Federal Form 1045)

1040XN-2002, 1040XN-2001, 1040XN-5 or 1040XN-4, or

line 14 of Forms 1040XN-3 or 1040XN-2). The Nebraska NOL

Line 1.

Column (1) will be the amount of the Nebraska

NOL as computed on Nebraska Form NOL.

is entered as an adjustment decreasing federal AGI (line 13

Nebraska Individual Income Tax Net Operating Losses - Instructions Page 2

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