How to Fill Out Iowa Form IA 124: Net Operating Loss Adjustment

Iowa Form IA 124, the Net Operating Loss Adjustment Schedule, is the form you attach to your Iowa return to handle any net operating loss that originated in a tax year beginning before January 1, 2023. Part I adds back the portion of your current federal NOL deduction that traces to a pre-2023 loss year, so Iowa does not give you the deduction twice. Part II lets you subtract whatever remains of your old Iowa-specific NOL against this year’s Iowa income. One form, two directions, and both parts can apply in the same year.1Iowa Department of Revenue. IA 124 Net Operating Loss (NOL) Adjustment Schedule

Who Needs to File It

You file IA 124 if you still have an unused NOL carryforward, federal or Iowa, from a tax year that began before January 1, 2023. The same form serves individuals filing the IA 1040, fiduciaries filing the IA 1041, corporate filers on the IA 1120, and franchise filers on the IA 1120F.1Iowa Department of Revenue. IA 124 Net Operating Loss (NOL) Adjustment Schedule

If every NOL you are carrying was generated in 2023 or later, skip the form. Iowa now conforms to federal NOL treatment for those losses, and they flow through your return without a separate state adjustment.

Part I: Adding Back the Pre-2023 Federal NOL

Part I has four lines, and the goal is to pin down how much of your current federal NOL deduction came from an old loss year and add that amount back to Iowa income.

Line 1 — Pre-2023 federal NOL carryover into the current year. If you filed an IA 124 last year, this is last year’s Part I, line 4. If you did not file in Iowa before 2024 (because you moved in), figure out how much of your federal NOL deduction traces to a loss year before 2023 and enter that.1Iowa Department of Revenue. IA 124 Net Operating Loss (NOL) Adjustment Schedule

Line 2 — Current-year federal NOL deduction. Individuals pull this from federal Form 1040, Schedule 1, line 8a, capped at the federal taxable income shown on the IRS Publication 536 NOL Carryforward Worksheet 2 for your tax year. Corporations use federal Form 1120, line 29a. Fiduciaries use federal Form 1041, line 15b, with the same Publication 536 cap.

Line 3 — Current-year Iowa addback. Enter the lesser of line 1 and line 2. This number is what gets added back on your Iowa return.

Line 4 — Remaining carryover. Subtract line 3 from line 1. This becomes next year’s Part I, line 1.

One trap worth flagging up front: if your federal NOL carryforward blends losses from different years (say 2021 and 2024), only the pre-2023 piece belongs on line 1. You have to break the federal deduction into its component loss years using the Publication 536 worksheets before you can fill out Part I correctly.

Part II: Deducting Your Remaining Iowa NOL

Part II is the mirror. Instead of adding income back, you subtract whatever is left of your old Iowa-specific NOL, up to the amount of your Iowa income this year. Six lines.

Line 1 — Beginning balance. This is last year’s Part II, line 6. For the 2023 tax year specifically, individual filers took the starting number from their 2022 IA 1040, Schedule A, Column F (Total).1Iowa Department of Revenue. IA 124 Net Operating Loss (NOL) Adjustment Schedule

Line 2 — Expired Iowa NOL. Enter any part of your pre-2023 Iowa NOL that reached its carryforward expiration at the end of last year. Most Iowa NOLs carried forward 20 years from the loss year under the old rules.2Cornell Law Institute. Iowa Admin Code r 701-302.18 – Net Operating Loss Carrybacks and Carryovers

Line 3 — Available Iowa NOL. Line 1 minus line 2.

Line 4 — Income attributable to Iowa. Resident individuals use IA 1040, line 4, before any pre-2023 NOL adjustment on Schedule 1. Nonresidents and part-year residents use IA 126, line 27. Corporate filers use IA 1120, line 11. If the number is zero or negative, enter zero. Pull the figure from before the NOL adjustment, not after; using the post-adjustment number understates your available income and costs you deduction room you were entitled to use.

Line 5 — Current-year Iowa deduction. The lesser of line 3 and line 4. You cannot deduct more Iowa NOL than you have Iowa income for the year.

Line 6 — Ending balance. Line 3 minus line 5. This carries to next year’s Part II, line 1.

In a low-income or break-even year, line 4 may wipe out most of your deduction. The unused balance stays alive and carries forward until it is fully used or hits its expiration date.

Where the Two Numbers Go on Your Iowa Return

Filling out IA 124 only matters if the two outputs land in the right spots on your main return.

For individuals on the IA 1040, the Part I addback (line 3) goes on IA 1040, Schedule 1, line 10. The Part II deduction (line 5) goes on IA 1040, Schedule 1, line 17.1Iowa Department of Revenue. IA 124 Net Operating Loss (NOL) Adjustment Schedule

Other filer types report as follows:

  • Fiduciary (IA 1041): addback on Schedule A, Part I, line 4; deduction on Schedule A, Part II, line 6.
  • Corporate income (IA 1120): addback on Schedule A, line 17; deduction on line 12.
  • Franchise (IA 1120F): addback on Schedule A, line 8; deduction on line 9.

Attach the completed IA 124 to the return. E-filed returns should include it as part of the electronic package.

Carrying the Balances Forward

Treat IA 124 as a rolling ledger. Part I, line 4 feeds next year’s Part I, line 1. Part II, line 6 feeds next year’s Part II, line 1. Keep a copy of every IA 124 you file, because an error in a beginning balance compounds forward into every future year.1Iowa Department of Revenue. IA 124 Net Operating Loss (NOL) Adjustment Schedule

Moving to Iowa partway through the transition adds a step. If you did not file an Iowa return before 2024, you have to reconstruct how much of your current federal NOL deduction traces to a pre-2023 loss year. The federal carryforward schedule in IRS Publication 536, Worksheet 1, is the starting point for that reconstruction.

When Pre-2023 NOLs Expire

Most Iowa NOLs carried forward 20 taxable years from the year of the loss. Losses from before August 6, 1997, had a 15-year window.2Cornell Law Institute. Iowa Admin Code r 701-302.18 – Net Operating Loss Carrybacks and Carryovers Those limits still govern your pre-2023 Iowa carryforwards. A 2010 loss, for example, closes out at the end of the 2030 tax year, and whatever is left goes on Part II, line 2 as expired.

Federal NOLs from before 2018 also have a 20-year life, while post-2017 federal NOLs carry forward indefinitely but are capped at 80 percent of taxable income per year. Once your old federal NOL is fully absorbed on the federal side, Part I of the IA 124 no longer applies to you.

Mistakes That Trigger Notices or Lost Deductions

Skipping Part I is the most common error. Taxpayers see the federal NOL deduction reduce their federal income and assume Iowa follows along. Iowa does not. Miss the addback and the Department of Revenue will adjust the return later, often with interest.

Putting the full federal NOL on Part I, line 1 is the next most common mistake. Only the pre-2023 portion belongs there. Mixed-year federal carryforwards need to be split before you touch the Iowa form.

On Part II, exceeding the income cap on line 4 produces a negative deduction that does not belong on the return and can hold up processing. Pulling line 4 from after the NOL adjustment instead of before shrinks the deduction you can legitimately take.

Getting the Form

Download IA 124 as a PDF from the Iowa Department of Revenue website.1Iowa Department of Revenue. IA 124 Net Operating Loss (NOL) Adjustment Schedule The current form is dated July 2024, with instructions updated as recently as September 2025. Commercial tax software that supports Iowa returns generally produces IA 124 automatically from the carryforward information you enter, but checking the software’s output against the form’s own instructions is a cheap sanity check on a return you are signing.