PDF document

- 1 -

Reset Form

Michigan Department of Treasury (Rev. 04-22) Issued under authority of Public Act 281 of 1967, as amended.

MICHIGAN Net Operating Loss Schedule MI-1045
Type or print in blue or black ink. Attachment 29
Year (YYYY) Month-Year (MM-YYYY) Month-Year (MM-YYYY)
For loss year or for loss year beginning and ending
Filer’s First Name M.I. Last Name Filer’s Full Social Security No. (Example: 123-45-6789)

If a Joint Return, Spouse’s First Name M.I. Last Name Spouse’s Full Social Security No. (Example: 123-45-6789)

1. Check the box to forgo the entire carryback period for the farming NOL. When you check the box, you are electing to carry
the farming NOL forward instead of carrying it back to previous years. Once the election is made, it is irrevocable.
PART 1: COMPUTE THE NET OPERATING LOSS (NOL)
2. Adjusted Gross Income (AGI). Enter the amount from MI-1040, line 10 of the loss year .................. 2. 00
Additions. Enter the corresponding amounts from Schedule 1.
3. Gains from Michigan column of MI-1040D and MI-4797 from Schedule 1,
line 3 .............................................................................................................. 3. 00
4. Losses attributable to other states from Schedule 1, line 4 .......................... 4. 00
5. Net loss from federal column of your Michigan MI-1040D or MI-4797 from
Schedule 1, line 5 .......................................................................................... 5. 00
6. Oil, gas, and nonferrous metallic mineral expenses (Michigan sourced)
deducted to arrive at AGI from Schedule 1, line 6 ......................................... 6. 00
7. Federal net operating loss deduction included in AGI from Schedule 1, line 7. 7. 00
8. Total. Add lines 3 through 7 ................................................................................................................. 8. 00
Subtractions. Enter the corresponding amounts from Schedule 1.
9. Gains from federal column of Michigan MI-1040D and MI-4797 from
Schedule 1, line 12 ..................................................................................... 9. 00
10. Income attributable to another state from Schedule 1, line 13 ..................... 10. 00
11. Oil, gas, and nonferrous metallic minerals income (Michigan sourced)
included in AGI from Schedule 1, line 19 ........................................................ 11. 00
12. Miscellaneous subtractions from Schedule 1, line 22 (see instructions) ...... 12. 00
13. Total. Add lines 9 through 12. Enter as a negative number .................................................................. 13. 00
14. Michigan NOL before required modifications. Combine lines 2, 8, and 13. If zero or greater, STOP; you
do not have a Michigan NOL..................................................................................................................... 14. 00
Modifications. Complete Part 2 before continuing.
15. Excess nonbusiness deductions from line 30....................................................... 15. 00
16. Excess capital loss (see instructions). Enter as a positive number ............. 16. 00
17. Michigan sourced adjustments (see instructions)........................................ 17. 00
18. Total Modifications. Add lines 15 through 17 ..................................................................................... 18. 00

19. Michigan NOL. Combine lines 14 and 18. If zero or greater, you do not have a Michigan NOL .................. 19. 00

PART 2: EXCESS NONBUSINESS DEDUCTIONS
Michigan-sourced Nonbusiness Deductions
20. Payments to a retirement plan as an individual or self-employed person ..... 20. 00
21. Alimony deducted and/or penalty for early withdrawal of savings ................. 21. 00
22. Other adjustments to income......................................................................... 22. 00
23. Subtotal. Add lines 20 through 22.................................................................. 23. 00
Michigan-sourced Nonbusiness Income
24. Interest income .............................................................................................. 24. 00
25. Dividend income ............................................................................................ 25. 00
26. Net nonbusiness capital gains (before any allowable exclusion) .................. 26. 00
27. Pension, IRA and annuities ........................................................................... 27. 00
28. Taxable alimony and other income ................................................................ 28. 00
29. Subtotal. Add lines 24 through 28.................................................................. 29. 00
30. Excess nonbusiness deductions. Subtract line 29 from line 23. If line 29
is greater than line 23, enter “0”. Enter here and carry to line 15 .................. 30. 00

- 2 -

2022 Schedule MI-1045, Page 2
Instructions for Michigan Net Operating Loss Schedule (Schedule MI-1045)

Purpose • Group 2 TCJA NOLs are those created in 2021
Michigan Net Operating Loss Schedule (Schedule and future tax years. These NOL deductions are
MI-1045) is used to compute the Michigan net operating limited to 80 percent of Michigan taxable income
loss (NOL) and is now filed with the loss year return before exemptions and previously claimed NOL
(including e-filed returns). deductions.
Michigan Net Operating Loss Deduction (Form 5674) is The TCJA eliminates most NOL carrybacks for NOLs
used to compute the current year Michigan NOL deduction. incurred in tax years after 2020 and allows the NOL to
Form 5674 is required to claim an NOL deduction on be carried forward indefinitely until fully absorbed. A
Schedule 1. two-year carryback is available for farming NOLs.
Michigan Net Operating Loss Carryforward deduction What is a Net Operating Loss?
is claimed on Michigan Schedule 1. A completed Schedule An NOL occurs when business loss exceeds income
MI-1045 for the loss year(s) and Form 5674 are required in a particular year. In general terms, a federal NOL is
before an NOL carryforward deduction can be claimed. computed by starting with federal taxable income and
Michigan Farming Loss Carryback Refund Request making the following modifications by eliminating:
(Form 5603), is used to claim a refund from a farming loss •
Capital losses in excess of capital gains and
carryback.
any excluded capital gains. The excess capital
Federal Tax Cuts and Jobs Act of 2017 loss deduction is calculated on a U.S. Form 1045
The federal Tax Cuts and Jobs Act (TCJA) of 2017 limits Schedule A, line 21 or 22. An excess capital loss
business losses that are included in adjusted gross income includes a U.S. Form Schedule D loss that is limited to
(AGI) for 2021 and future tax years. The limitation is $3,000. The capital loss may be greater than $3,000 if
computed by aggregating business income and business nonbusiness capital losses were offset by business gains
losses. If the computation results in a loss, the Internal that are also reported on U.S. Form Schedule D.
Revenue Code (IRC) 461(l) limits business losses in Example: U.S. Form 1045,Schedule A , line 22
excess of business income. The limitation is adjusted for computed a $15,000 excess capital loss. The $15,000
inflation each year. Losses in excess of the limitation are excess capital loss cannot be used to increase the NOL.
not included in AGI and become an NOL available to claim
• NOL carryovers from other years
in the following year computed on the Michigan Excess
Business Loss Form MI-461. • Excess of nonbusiness deductions over nonbusiness
income
Federal CARES Act of 2020
Example: $10,000 nonbusiness stock loss and $50,000
For tax years 2018, 2019, and 2020 the federal Coronavirus
gain from the sale of a business asset (U.S. Form 4797)
Aid, Relief, and Economic Security Act (CARES Act)
produce a U.S. Form Schedule D gain of $40,000. The
replaced many of the provisions of the federal TCJA. The
$10,000 stock loss is nonbusiness and cannot be used to
2020 Schedule MI-1045 accommodates the changes set by
increase an NOL.
the CARES Act and should be used if you are claiming a
If the end result is negative, a federal NOL has been
loss created in 2018, 2019 or 2020.
created for use in another tax year. For additional
Terminology information on federal NOLs, see Internal Revenue Service
Due to the federal TCJA, limitations were imposed on (IRS) Publication 536.
NOL deductions for losses incurred in 2018 and future tax The Michigan NOL
years. This created two groups of NOLs. For Michigan The Michigan NOL is computed independently of the
forms and instructions these are identified as Group 1 federal NOL. The calculation of a Michigan NOL follows
NOLs and Group 2 NOLs. Group 2 NOLs are further the same general format as the federal NOL calculation
divided into two subcategories as Group 2 CARES and but begins with federal AGI rather than federal taxable
Group 2 TCJA. income. Therefore, federal itemized or standard deductions
• Group 1 NOLs are those created in 2017 and prior. that may be used to create or contribute to the federal
• Group 2 NOLs: NOL are not considered when calculating the Michigan
• Group 2 CARES NOLs are those created in 2018, NOL. The Michigan NOL is subject to the allocation and
2019 and 2020. The carryforward of these NOL apportionment provisions of Chapter 3 of the Income Tax
deductions are limited to 80 percent of Michigan Act which excludes income and loss attributable to other
taxable income before exemptions and previously states. Additionally, income from the production of oil and
claimed NOL deductions beginning in tax year gas and nonferrous metallic mineral extraction subject to
2021. Michigan severance tax and expenses of production are
excluded.

- 3 -

2022 Schedule MI-1045, Page 3
To determine whether an NOL was incurred from Amending the NOL
Michigan sources, regardless of whether or not there If you file an amended MI-1040 for a loss year which
was a corresponding federal NOL, complete the changes your NOL, you must include the applicable
Schedule MI-1045 for the year of the loss. amended MI-1045 for the loss year. Provide all required
The Michigan NOL may be carried over in the same supporting documentation to substantiate the change.
manner and to the same time periods as provided for If you need to amend an NOL carryforward, see the
in IRC 172 in effect for the year the loss was incurred. applicable year’s MI-1040 booklet on filing an amended
An NOL must be claimed in consecutive years. If MI-1040. Include all required documentation to
there is a change in filing status, Michigan follows substantiate the change. An NOL must be claimed in
federal regulations. Additionally, the amount of the consecutive years. Do not amend Form MI-1040 to request
combined Michigan NOL carryover must be reduced a refund for the carryback year, see Form 5603 to claim a
by any Michigan sourced excess capital loss and other farming loss carryback.
modifications required under IRC 172 or elections under
Statute of Limitations for NOL Refund Claims
IRC 965 claimed in the previous carryover year.
For additional information regarding NOLs, see IRS A claim for a refund based on an NOL must be filed
Publication 536 and Michigan Revenue Administrative within the four-year statute of limitations period (open tax
year). If an NOL is sustained in a year that is outside the
Bulletin 2020-23.
four-year statute of limitations period (closed tax year), a
Nonresidents and Part-Year Residents taxpayer may still claim the NOL deduction in open tax
Nonresidents and part-year residents may also be entitled years. However, the election to forgo the carryback of an
to a Michigan NOL deduction. Only Michigan-sourced NOL is not allowed if the NOL was established outside the
income or loss may create a Michigan NOL. Complete statute of limitations period. The taxpayer must calculate
Schedule MI-1045 to determine if a Michigan NOL was the amount of the Michigan NOL that would have been
incurred. In a carryforward year, enter the total amount absorbed by Michigan taxable income before exemptions
of the federal NOL deduction included in AGI on in the closed tax year(s) to determine the amount that can
Michigan Nonresident and Part-Year Resident Schedule be carried forward to the first open tax year(s). Treasury
(Schedule NR), line 11, column C. The Michigan NOL may redetermine the correct taxable income before
deduction is computed on Form 5674 and claimed as a exemptions in a closed tax year to ascertain either the
subtraction on the Michigan Schedule 1. amount of an NOL or the amount of an NOL deduction
NOTE: Do not report a Michigan NOL deduction absorbed in the closed tax year(s) to determine the correct
on Michigan Schedule NR or claim the federal NOL NOL carryforward to the first open tax year.
deduction as an addition on Michigan Schedule 1.

Line-by-Line Instructions for Schedule MI-1045

Lines not listed are explained on the form. Line 19: This is the Group 2 NOL available to claim as
a carryforward to the next tax year on Form 5674 or
Part 1: Compute the Net Operating Loss carryback on Form 5603, if eligible.
To complete Part 1, use entries from your Michigan
Part 2: Excess Nonbusiness Deductions
Individual Income Tax Return (MI-1040) and Michigan
Schedule 1 for the year the loss occurred. To complete Part 2, use the Michigan portion of entries
from your U.S. Form 1040 for the year the loss occurred.
Line 12: Miscellaneous subtractions are limited to:
Michigan follows the general NOL provisions of IRC
• Losses from the disposal of property reported in the
172 for determining nonbusiness deductions. See
Michigan column of MI-1040D, line 13, or MI-4797,
IRC Reg 1.172-3 for more information.
line 18b
Lines 20 through 22: Enter the Michigan-sourced
• Adjustments for out of state business activity not
nonbusiness deductions from U.S. Form 1040 Schedule 1.
reported on another line of Schedule 1 or this form.
Lines 24 through 28: Enter the Michigan-sourced
Line 15: Complete Part 2 and enter amount from line 29
nonbusiness income included in line 14.
on this line.
Line 16: The excess capital loss deduction must be
calculated on a U.S. Form 1045 Schedule A, line 21 or 22,
then entered on this line.
Line 17: Enter the following Michigan sourced
adjustments from U.S. Form 1040 Schedule 1, used to
arrive at federal AGI:
• Deduction for self-employment tax
• Deduction for self-employed health insurance
• Educator expenses and/or moving expenses

- 4 -

 Required Supporting Documentation 

To help reduce processing delays, review the following to ensure all supporting documents 
are included when establishing an NOL. 

r    U.S. Form 1040 

r    U.S. Form 1040 Schedule(s) 1, A, B, C, D, E, F 

r    U.S. Form 4797 

r     U.S. Form 4835 

r  U.S. Form 1045 Schedule A 

r  Schedule K-1(s)  

r    MI-1041 and final Schedule K-1 from the U.S. Form 1041 when an NOL is created from 
 the termination of a trust 

r    For all business activity, provide a statement indicating the type and location (city and 
 state) of each source of income or loss. For assistance, refer to the “Business, Rental & 
 Royalty Activity Worksheet” available on Treasury’s website. 

r  Any other applicable documentation to support the NOL.

PDF file checksum: 3331349949

(Plugin #1/9.12/13.0)