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Category: Kentucky

Kentucky Subtractions from Income

Interest Income from U.S. Government Bonds and Securities

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

Long Term Care Insurance Premiums

Enter long-term care insurance premiums paid in 2011. Do not claim as an itemized deduction.

Resident Adjustment from Partnerships, Fiduciaries and S. Corp Schedule K-1

Enter resident adjustments 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 from KY Form 4562

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.

Other Subtractions

Enter other subtractions from federal adjusted gross income not listed above which include:

  • income of active duty military pay;
  • income received from the tobacco quota buyout;
  • income received as a result of the Master Tobacco Settlement Agreement, the secondary settlement fund referred to as “Phase II”;
  • income received from the Tobacco Loss Assistance Program (TLAP);
  • 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.

For additional information, please refer to the Schedule M instructions.