Form Ia 123 - Iowa Net Operating Loss (Nol) Worksheet Page 2
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3IA 123 Net Operating Loss Worksheet Instructions
year 1994, any Iowa capital gain deduction must
Application of Net Operating Loss for Iowa
be added back in the computation of the Iowa
Purposes:
NOL. Further, when applying an NOL from tax
For tax years beginning after August 5, 1997, the net
year 1994 or later, the capital gain deduction is not
operating loss attributable to Iowa is subject to the
allowed in the carryback or carryover tax year and
federal two-year carryback and up to a 20-year
must be added back to income to the extent of the
carryover provision. This provision does not apply
NOL.
to casualty losses and losses of farmers and small
businesses attributable to losses incurred in
Line 5c: Nonbusiness itemized deductions and
presidentially-declared disaster areas (back 3,
nonbusiness adjustments are allowed only to the
forward 20). Effective for tax years beginning on or
extent of nonbusiness Iowa income. An itemized
after January 1, 1998, Iowa net operating losses from
deduction schedule (Schedule A) for the loss year
farming may be carried back five years and forward
must be included with the IA 1040X amended return
20 years. However, taxpayers with net operating
when making an itemized deduction entry on this
losses from farming for tax years beginning in
line.
1998 or after can elect to forego the 5-year
Line 9a: Your deduction for the excess of capital
carryback provision and can carry back the loss
loss over capital gain is not allowed, and you are
two years (three years for a loss in a national
not permitted the capital gain deduction for the tax
disaster area or due to a casualty, storm or theft.)
years that the exclusion/deduction applies.
This federal election can be made on the federal
If the loss year in Section A of this worksheet is
original return or on an amended federal return
1994 or later, then any capital gain deduction
within the 6-month period after the due date.
must be added back to taxable income.
Election:
Line 9b: If you have filed a federal net operating
If there is both a federal net operating loss and an
loss carryback/ carryover for this same year, and
Iowa net operating loss and a timely election is
due to capital loss or capital gain exclusions in
made to forego the carryback period for federal
the application year you were required to
purposes, that election is binding for Iowa purposes.
decrease
your
medical
expense
deduction,
If a net operating loss occurs for Iowa purposes but
casualty and theft losses, and miscellaneous
not for federal purposes, the loss must first be carried
deductions, enter the total amount of those
back and then carried forward for the carryback and
decreases on line 9b.
carryforward periods applicable to that tax year. No
Line 11: If you claimed the Iowa standard
election to forego the carryback period is allowable.
deduction in the carryback/ carryover year and
Classification of income:
you made an entry on line 9a, you may
For
purposes
of
identifying
business
and
recalculate your Iowa standard deduction and
nonbusiness deductions, refer to the federal
enter the appropriate increase, if any, on line 11.
guidelines since they are applicable for Iowa net
Line 13-14: If a net operating loss is greater than
operating loss purposes.
the adjusted taxable income in a carryback or
In order to allow nonbusiness deductions, a
carryover year, an IA 1040X amended return for
schedule showing all such nonbusiness deductions
the carryback year (IA 1040 for carryover year) must
must be provided.
be included showing no taxable income. The
Nonbusiness Adjustment to Income:
remaining net operating loss on line 14 is to be
Nonbusiness adjustments to income which are most
carried forward to the next tax year.
common, but not limited to: IRA, HR-10, early
Line 20b: Enter the itemized deductions allowed
withdrawal penalty, alimony paid, disability income
on your original Iowa income tax return or the
exclusion, and pension exclusion. Note: The health
revised Iowa standard deduction due to line 16.
insurance deduction will typically be classified as a
The Iowa standard deduction must be refigured
business deduction.
after application of the NOL carryback/carryover
Capital
Gain
and
Loss
Regarding
Net
in any year in which the NOL is carried and fully
Operating Loss Computation:
absorbed.
An individual or other noncorporate taxpayer can
deduct nonbusiness capital loss only to the extent
of nonbusiness capital gain. Beginning with tax
41-123b (06/19/14)
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