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Kentucky State Subtractions

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Kentucky State Subtractions



-Enter the amount of taxable state income tax refund or credit reported on your federal return and included as income on Form 740, page 1, line 5.


-Enter interest income from U.S. government bonds and securities. Do not include taxable interest from securities, such as FNMA (Fannie Mae), GNMA (Ginnie Mae) and FHLMC (Freddie Mac), which are merely guaranteed by the U.S. government.


-Pension Income Exclusion—The 2018 exclusion amount is 100 percent of taxable retirement benefits or $31,110, whichever is less. All pension and retirement income paid under a written retirement plan (qualified or unqualified) is eligible for exclusion. This includes pensions, annuities, IRA accounts, 401(k) and similar deferred compensation plans, income received from converting a regular IRA to a Roth IRA, death benefits, disability retirement benefits and other similar accounts or plans.


-Enter Social Security and Social Security equivalent U.S. Railroad Retirement Board benefits included on Form 740, page 1, line 5. These amounts are reported on federal Form 1040, line 5(b).


-Enter resident adjustment from Kentucky Schedule K-1. Partners, beneficiaries of estates and trusts and S corporation shareholders, see Kentucky Schedule K-1 instructions. Subtract the distributive share of net income from an S corporation subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300.


-Depreciation, Section 179 Deduction and Gains/Losses From Disposition of Assets—Important: Use Schedule M, lines 3 and 12 only if you have elected for federal income tax purposes to take the 30 percent or the 50 percent special depreciation allowance or the increased Section 179 deduction for property placed in service after September 10, 2001. A copy of the federal Form 4562 if filed for federal income tax purposes must be submitted with Form 740 to verify that no adjustments are required.


-Enter Kentucky net operating loss calculated from prior years. Keep worksheet detailing the net operating loss claimed with your records.


Note: If your net operating loss occurred in 2018, complete Kentucky Schedule KNOL to determine the amount of your loss to be carried forward in future years. Any carry forward of a prior year loss claimed on line 13 of Schedule M should be calculated using a worksheet. Keep a copy for your records and enclose a copy with your return.


-Enter other subtractions from federal adjusted gross income not listed above (enclose detailed schedule).




• income of active duty military pay;


• income of precinct workers for election training or working at election booths;


• capital gains on property taken by eminent domain;


• passive activity loss adjustment (see Form 8582-K and instructions);


• income of a child reported on the parent’s return;


• artistic charitable contributions (if you do not itemize deductions);


• the federal work opportunity credit used to reduce wages;


• at-risk limitations (see instructions below);


• qualified farm networking project differences per KRS 141.0101(15);


• differences in the gains (losses) from the sale of intangible assets amortized under the provisions of the Revenue Reconciliation Act of 1993;


• differences in gains (losses) from assets purchased after September 10, 2001; and


• income of military personnel killed in the line of duty.


Note: All income earned by soldiers killed in the line of duty is exempt from Kentucky tax for the year during which the death occurred and the year preceding the death. Federal and state death benefits payable to the estate or any beneficiaries may also be excluded. Additional information may be found in the General Information section of the instructions for Form 740.



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Views: 953 Created on: Jun 15, 2013
Date updated: Dec 14, 2018
Posted in: States, Kentucky

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