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Category: Ohio

Ohio Subtractions From Income

Federal Interest and Dividends Adjustment

Enter interest and dividend income included in your Federal AGI from obligations issued by the United States Government or its possessions/territories that are exempt from Ohio tax by law, such as US Savings bonds (Series E, EE, H, or I), Treasury notes, bills and bonds and Sallie Maes.

 

Examples of interest income that are not deductible:

 

* Interest paid by the IRS on an IRS income tax refund

* Interest income from Fannie Maes or Ginnie Maes

 

Depreciation Expense Adjustment

Deduct 1/5, 1/2 or 1/6 of the IRS Code sections 168(k) and 179 depreciation adjustments that you added back on your previous Ohio income tax returns. The fraction used depends on the fraction used when the add-back took place. Deduct 1/5 of amounts that resulted from a 5/6 add-back. Deduct 1/2 of amounts that resulted from a 2/3 add-back. Deduct 1/6 of amounts that resulted from a 6/6 addback. You can take this deduction even if you no longer directly or indirectly own the asset.

 

Note: These deductions cannot be taken to the extent that your sections 168(k) and 179 depreciation expenses increased a federal net operating loss carryback or carryforward. If a deduction is not available for this reason, you may carry forward the amount not deducted for Ohio purposes and deduct it during a future year. See Ohio Revised Code section 5747.01(A)(20) and our information release IT 2002-02 entitled “Ohio Bonus Depreciation Adjustments,” which is available on our Web site at tax.ohio.gov.

 

Disability and Survivor Benefits

You may deduct the following:

* Benefits from an employee’s disability plan paid as a result of permanent physical or mental disability. 

Note:  The disability must be (or presumed to be) permanent.


Survivorship benefits paid from qualified survivorship plan as the result of the death of a covered employee.

You may not deduct the following:


Payments that otherwise qualify as retirement or pension benefits. Upon reaching your plan's minimum retirement age, the disability benefits received under that plan become retirement or pension benefits and are no longer deductible as disability or survivorship. If you are uncertain of the minimum retirement age under your plan, please contact your plan administrator for this information.


* Temporary wage-continuation plans.

Payments for temporary illnesses or injuries (for example, sick pay provided by an employer or third party).

 

Social Security and Other Benefits

Deduct the following benefits only to the extent that they are included in your federal adjusted gross income:

Social Security Benefits

Tier I and Tier II railroad retirement benefits

* Supplemental railroad retirement benefits

Dual railroad retirement benefits

Railroad disability

 

Interest or Gain from Sales of OH Public Obligations

Deduct interest income earned from Ohio public obligations and Ohio purchase obligations if the interest income was included in your Federal AGI (Adjusted Gross Income). You may also deduct any gains resulting from the sale or disposition of Ohio public obligations to the extent that the gain was included in your Federal AGI.

 

Deduct income from providing public services under a contract through an Ohio state project (including highway services) if the income was included in your federal adjusted gross income. You can also deduct income from a certain transfer agreement or an enterprise transferred under that agreement if the income was included in your federal adjusted gross income.

 

Contributions to College Advantage 529 Savings Plan or Purchases of Tuition Credits

Contribution Deduction. You may deduct purchases of tuition units and contributions to the Ohio Tuition Trust Authority's CollegeAdvantage 529 Savings Plan, up to $2,000 per beneficiary per year if these amounts do not qualify as a deduction on page 1 of federal 1040. Qualifying purchases exceeding the $2,000 limitation may be deducted on future years' returns, subject to the annual $2,000-per-beneficiary limitation. Married taxpayers may deduct up to a maximum of $2,000 per beneficiary whether their filing status is married filing jointly or married filing separately..

 

Adjustment for Earnings on Certain Distributions. The earnings portion of distributions from Internal Revenue Code section 529 programs can generally be excluded from federal adjusted gross income if the distribution is used solely to fund qualified higher-education expenses. If the earnings portion of a 2016 distribution from Ohio's CollegeAdvantage program is excluded from federal adjusted gross income (Ohio IT 1040, line 1), then no further adjustment is allowed on line 29.

 

For federal income tax purposes, however, there are certain situations where, due to the coordination of benefits from an Internal Revenue Code 529 program with other federal tax benefits for higher-education expenses (such as the federal American Opportunity Tax Credit), the earnings on a distribution from the CollegeAdvantage program that are actually used to pay qualified higher-education expenses cannot be excluded from federal adjusted gross income. If any portion of the earnings reported to you on your 2016 federal 1099-Q from the CollegeAdvantage program is used to pay qualified higher education expenses, and if because of certain federal tax limitations such earnings are not excluded from your federal adjusted gross income, you can exclude such portion by reporting it here.

 

Adjustment for Distributions at a Loss. If a distribution reported to you on 2016 federal 1099-Q reflects a loss (the earnings in box 2 is negative), you can report this loss here as a positive number if this loss is not deducted in computing federal adjusted gross income (Ohio IT 1040, line 1).

 

Medical Savings Account for Eligible Expenses

You may be able to deduct the amount of funds you deposited into a medical savings account. If filing a joint return, your spouse may also be able to deduct his/her funds deposited into his/her medical savings account. For 2016 the maximum amount of deposited funds you may be able to deduct is $4,636. If filing a joint return, each spouse can deduct up to $4,636 of funds deposited into his/her account for a maximum joint deduction of $9,272. Any investment income or interest earned on the funds deposited into a medical savings account is also deductible if the income or interest is included in your Federal AGI.

 

Note: You must reduce the amount of this deduction by any amount that you claimed on line 25 of your IRS form 1040.

 

Military Pay for Ohio Residents While Stationed Outside of Ohio

Ohio Revised Code section 5747.01(A)(24) provides that an Ohio resident servicemember can deduct active duty military pay and allowances that are included in federal adjusted gross income if those amounts are received for active duty service while the servicemember is stationed outside Ohio. Do not deduct on this line any other types of income such as civilian wages, interest, dividends and capital gains.

 

Note: The Nov. 11, 2009, amendment to the Servicemembers Civil Relief Act of 2003 described on line 25 does not apply to Ohio-domiciled spouses of servicemembers who reside with their spouses outside the state. These spouses are presumed to retain their Ohio domicile.

 

The term "stationed" refers to an Ohio resident servicemember's permanent duty station. For purposes of this exemption, "permanent duty station" has the same meaning as specified in Ohio Revised Code 5103.20, Article II, Subparagraph (U), that is, it means the military installation where an active duty servicemember – or, concerning this exemption, an Ohio resident servicemember in the Ohio National Guard or military reserve forces – is currently assigned and is physically located under competent orders that do not specify the duty as temporary. Periods of training in which a servicemember, either individually or as part of a unit, departs from his/her permanent place of duty and then returns following the completion of the training, are not included in the definition of "stationed." However, periods of active duty outside Ohio for purposes other than training, or periods of training greater than 30 days outside Ohio, as described below, qualify a servicemember for this exemption.

 

Military pay and allowances for Ohio resident servicemembers who are stationed inside Ohio, and their spouses, will continue to be subject to Ohio individual income tax. These amounts will also be subject to school district income tax if the servicemember was domiciled in a taxing school district – even if the servicemember did not reside in the school district at any time during the taxable year. 

 

Income from Neighboring States OR Nonresident Military

A full-year nonresident living in a border state does not have to file if the nonresident's only Ohio-sourced income is wages received from an unrelated employer.

If Ohio Income tax was withheld on this income but you meet the two conditions set forth above, you may file an Ohio income tax return to get a full refund. Enter the amount of income from your W-2 box 1 earned in Ohio.

Exceptions: Reciprocity agreements do not apply to you if you own directly or indirectly at least 20% of a pass-through entity having nexus in Ohio. Ohio Revised Code section 5733.40(A)(7) reclassifies compensation from such pass-through entities to a distributive share of the income from the pass-through entity. You must claim the nonresident/part-year resident credit on the Ohio Schedule of Credits.


You were a part-year resident of Ohio or you had additional sources of income from Ohio or do not meet the two conditions mentioned above. If so, you must file an Ohio State income tax return and claim the nonresident/part-year resident credit on Schedule D; OR

The reciprocal agreements do not apply. These agreements do not apply to you if you own directly or indirectly at least 20% of a pass-through entity having nexus in Ohio.

 

Nonresident Military Personnel and Their Spouses

The Servicemembers Civil Relief Act of 2003, as amended in 2009, is a federal law that provides that a state cannot consider a servicemember or his/her spouse to be a resident or a nonresident simply because he/she is present in the state - or absent from the state - due to military orders of the servicemember. Additionally, the 2009 amendment to the act provides that the wage and salary income of the nonresident spouse of a servicemember is exempt from the income tax of the state in which the servicemember and spouse are stationed and living, provided that the servicemember and spouse are residents of the same state. 

 

Military Retirement Income and Military Injury Relief Fund

Uniformed Services Retirement Income

Taxpayers who retired from the uniformed services can deduct their military retirement income to the extent that income is not otherwise deducted or excluded in computing federal or Ohio adjusted gross income. "Uniformed services" includes the active or reserve components of the U.S. Army, Navy, Air Force, Marine Corps, Coast Guard and National Guard, and the commissioned corps of both the National Ocean and Atmospheric Administration and the Public Health Service.

Taxpayers who served in the military and receive a federal civil service retirement pension are also eligible for a limited deduction if any portion of their federal retirement pay is based on credit for their military service. These retirees can deduct only the amount of their federal retirement pay that is attributable to their military service.

If you are eligible for this limited deduction, refer to your federal civil service retirement benefit handbook to determine the number of years of your military service. Divide the number of years of military service by the total number of years of combined military service and civilian employment with the U.S. government. Take this fraction and multiply it by the amount of your federal civil service pension you have included on line 1 of this return. The resulting number is the amount of your federal civil service pension that you can deduct.


Military Injury Relief Fund

Enter military injury relief fund amounts that you reported on Ohio IT 1040, line 1 (federally adjusted gross income).

 

Qualified Organ Donor Expenses and Contributions to Individual Development Accounts

Deduct up to $10,000 of qualified organ donation expenses you incurred during the taxable year. If your filing status is married filing jointly, each of you can deduct on this line up to $10,000 of qualified organ donation expenses you each incurred during the taxable year. "Qualified organ donation expenses" means unreimbursed travel and lodging expenses that you incur in connection with your donation, to another human being, of your human liver, pancreas, kidney, intestine, lung or any portion of your human bone marrow.

 

Note: You can claim this deduction only once for all taxable years. If you claim the deduction for this year, you cannot claim this deduction in any subsequent year. If your filing status is married filing jointly and if you and your spouse both claim the deduction for this year, both you and your spouse cannot claim this deduction in any subsequent year. However, if your filing status is married filing jointly but only one spouse claims this deduction for this year, the other spouse can claim the deduction in a subsequent year, regardless of your spouse’s filing status in that subsequent year.

 

Federal Targeted Jobs Tax Credit Adjustment (Wage Expense)

Deduct the amount of employer wage and salary expenses that you did not deduct for federal income tax purposes because you instead claimed the federal work opportunity tax credit.

 

Refunds of Prior Year Federal Itemized Deductions

Deduct refunds or reimbursements of expenses you originally deducted on a prior year federal income tax return if the following conditions are met:

The refund or reimbursement was included in your federal adjusted gross income on your 2016 federal 1040, line 21; AND

The expense for which you were refunded or reimbursed was deducted as an itemized deduction on Schedule A of a prior year federal income tax return.

 

Repayment of Income Reported In a Prior Year

Enter the amount of income that you paid back in a subsequent year if that amount meets the following three requirements:

For Federal income tax purposes you claimed either (i) an itemized deduction on Schedule A of your 2016 federal income tax return for the amount repaid OR (ii) a tax credit on your 2016 federal income tax return based upon the amount repaid; AND

You do not deduct this amount on any other line on your Ohio tax return for this year or any other year; AND

In the year you received the income, the income did not qualify for either the resident or nonresident/part year resident credits on your Ohio income tax return.

 

Portion of Certain College Grants Used To Pay Room and Board

Deduct the federally taxable portion of a federal Pell Grant and/or Ohio College Opportunity Grant used to pay room and board.

You qualify for this deduction if you, your spouse or your dependent was a student enrolled in a post-secondary educational institution, used a portion of a Pell Grant and/or an Ohio College Opportunity Grant to pay room and board expenses, and this portion was included in your federal adjusted gross income. The room and board, including meal plans, must have been furnished at the facilities of the educational institution for which the grant was awarded.

See the worksheet on the Ohio website by clicking here.


Ohio National Guard Reimbursement and Benefits

Deduct the following amounts, but only if (i) these amounts are in your federal adjusted gross income (Ohio IT 1040, line 1) and (ii) you have not already deducted these amounts elsewhere on Ohio Schedule A:

Receipt of Ohio Adjutant General-authorized Ohio National Guard reimbursement for group life insurance premiums paid; AND

Receipt of Ohio Adjutant General-authorized payment of death benefits received as a beneficiary of an active duty member of the Ohio National Guard who died while performing active duty.

 

Individual Development Accounts

You can deduct matching contributions that you made to an Individual Development Account when the account has been established by a county department of human services. For further information, contact your local county department of human services.

Income Earned By Military Nonresidents

The Servicemembers Civil Relief Act of 2003, as amended in 2009, is a federal law that provides that a state cannot consider a servicemember or his/her spouse to be a resident or a nonresident simply because he/she is present in the state – or absent from the state – due to military orders of the servicemember.

 

Additionally, the 2009 amendment to the act provides that the wage and salary income of the nonresident spouse of a servicemember is exempt from the income tax of the state in which the servicemember and spouse are stationed and living, provided that the servicemember and spouse are residents of the same state. Military payroll authorities will generally withhold income tax for the state of legal residence shown on the servicemember's federal DD 2058. A servicemember who had state income tax withheld in error should have the military payroll authorities correct the state of legal residence shown on his/her federal DD 2058. A servicemember's nonresident spouse who had Ohio income tax withheld and who claims exemption under the 2009 amendment to the Servicemembers Civil Relief Act of 2003 should file an Ohio income tax return claiming a refund.

 

Unreimbursed Long-Term Care Insurance Premiums, Unsubsidized Health Care Insurance Premiums and Excess Health Care Expenses

There are several deductions for unreimbursed medical expenses:

* Excess medical care expenses and subsidized medical care insurance premiums for dental, vision and health;

* Unsubsidized medical care insurance premiums for dental, vision and health;

*
Unsubsidized long-term care insurance premiums; AND

* Accident and health insurance premiums paid for qualifying dependent relatives.

 

Note: Unsubsidized medical care insurance includes amounts under the Affordable Care Act even if the taxpayer receives a federal subsidy for purchasing it.

 

Military Injury Relief Fund

Enter on this line military injury relief fund amounts that you reported on Ohio IT 1040, line 1 (pulled from federal adjusted gross income). If not included in federal adjusted gross income, then you cannot enter here, those military injury relief fund amounts you received on account of physical injuries or psychological injuries, such as post-traumatic stress disorder, if those injuries are a direct result of military action in Operation Iraqi Freedom or Operation Enduring Freedom. But you must include on Ohio IT 1040, line 1 (pulled from federal adjusted gross income) and Ohio Schedule A, line 27 (Military Injury Relief Fund - Deductions from Income) any other military injury relief fund amounts you received.

Contributions to a STABLE account

You may deduct contributions to a STABLE (Ohio ABLE) account, up to $2,000 per beneficiary per year. Qualifying contributions exceeding the $2,000 limitation may be deducted on future years' returns until fully utilized, subject to the annual $2,000 per beneficiary limitation. Married taxpayers may deduct up to a maximum of $2,000 per beneficiary whether their filing status is married filing jointly or married filing separately.

 

Miscellaneous Federal Deductions

For information about miscellaneous federal tax adjustments, see the Ohio Web site by clicking here.