Indiana · Net Operating Loss (NOL) Deduction
Net Operating Loss (NOL) Deduction in Indiana (2026)
Carry forward net operating losses to offset up to 80% of taxable income in future years when business deductions exceed income. Indiana has a flat 2.95% income tax, so a Indiana filer's combined marginal rate on the next dollar at $61,944 of income is about 14.95% (12% federal + 2.95% IN).
2026 savings example for Indiana
Planning estimate for a single filer earning $61,944 (Indiana median household income in LevyIO's state dataset) who removes $5,000 from taxable income. Federal tax uses the 2026 IRS brackets after the $16,100 standard deduction; IN tax uses the state brackets in LevyIO's dataset and assumes the state follows the federal treatment.
Estimated total savings
$748
Federal savings
$600
$5,253 → $4,653 · 12% bracket
IN state savings
$148
$1,827 → $1,680 · 2.95% marginal
Combined marginal rate
14.95%
≈ $150 saved per $1,000 deducted
Federal × Indiana marginal rates (2026, single)
Gross-income ranges include the federal standard deduction. The IN column is the state marginal rate at the midpoint of each range. The last column is the tax saved per $1,000 deducted at that combined rate.
| Federal bracket | Gross income (single) | IN marginal | Combined | Per $1,000 |
|---|---|---|---|---|
| 10% | $16,100 - $28,500 | 2.95% | 12.95% | $130 |
| 12% | $28,500 - $66,500 | 2.95% | 14.95% | $150 |
| 22% | $66,500 - $121,800 | 2.95% | 24.95% | $250 |
| 24% | $121,800 - $217,875 | 2.95% | 26.95% | $270 |
| 32% | $217,875 - $272,325 | 2.95% | 34.95% | $350 |
| 35% | $272,325 - $656,700 | 2.95% | 37.95% | $380 |
| 37% | Over $656,700 | 2.95% | 39.95% | $400 |
Eligibility & forms
Businesses and self-employed individuals with losses exceeding income
- Business deductions exceed business income
- Can carry forward indefinitely
- Limited to 80% of taxable income in carryforward year
Federal forms: Form 1045, Schedule A (Form 1045)
Indiana filing notes
Account for county tax on top of 2.95%. Indiana uses federal AGI with state adjustments. Property taxes are capped. College and teacher credits available.
Common mistakes: Not tracking NOL carryforwards across years; Forgetting the 80% taxable income limitation; Confusing pre-2018 and post-2017 NOL rules.
Frequently asked questions
How much can the Net Operating Loss (NOL) Deduction save a Indiana taxpayer in 2026?
In LevyIO's example, a single filer with $61,944 of income (the Indiana median household income in our state dataset) who removes $5,000 from taxable income saves about $600 in 2026 federal tax (12% marginal bracket) plus about $148 in Indiana tax (2.95% state marginal rate), roughly $748 combined. It is a planning estimate computed from the 2026 IRS brackets and LevyIO's IN bracket data, not a survey figure.
What is the Indiana income tax rate for 2026?
Indiana has a flat 2.95% income tax. The IN standard deduction in LevyIO's dataset is $0 single / $0 married. Low flat 2.95%. County taxes add 0.5-2.96%. Uses federal AGI. Property tax caps 1-3%.
Who qualifies for the Net Operating Loss (NOL) Deduction in Indiana?
Businesses and self-employed individuals with losses exceeding income. The federal rules are the same in every state; the requirements are: Business deductions exceed business income; Can carry forward indefinitely; Limited to 80% of taxable income in carryforward year. Indiana filers should confirm on the IN return whether the state follows the federal treatment.
Which forms do I file to claim the Net Operating Loss (NOL) Deduction?
Federal: Form 1045, Schedule A (Form 1045). Indiana: check the Indiana Department of Revenue instructions for the matching state schedule. Common mistakes: Not tracking NOL carryforwards across years; Forgetting the 80% taxable income limitation; Confusing pre-2018 and post-2017 NOL rules.
Net Operating Loss (NOL) Deduction in other states
Sources
Reviewed 2026-09-17. Estimates are educational planning figures computed from the IRS 2026 inflation adjustments and LevyIO's state bracket dataset; they are not tax advice.