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Subtractions

American Indian ORS 316.777

[Subtraction code 300]

Are you an American Indian? If so, you might not have to pay Oregon income tax on your income. You may be able to subtract all or part of your income if all the following are true:

  • You are an enrolled member of a federally recognized American Indian tribe, and
  • Your income is derived from sources within federally recognized Indian country in Oregon, and
  • You lived in federally recognized Indian country in Oregon at the time the income is earned.

“Indian country” is defined as any land within a current federal Indian reservation boundary and
other lands held in trust by the United States government for a tribe.

For enrolled members of federally recognized American Indian tribes who live in Indian country in Oregon, income exempt from Oregon income tax includes:

  • Wages earned for work performed in Indian country in Oregon.
  • Income from business or real estate located in Indian country in Oregon.
  • Retirement income if the contributions to the plan came from or were connected with services performed in Indian country.
  • Unemployment compensation if the benefits were received as a result of work performed in Indian country.
  • Interest, dividends, and capital gains from the sale of stocks and other intangibles, regardless of where the accounts are located.
  • Gambling winnings from Indian gaming centers (casinos).
  • Indian tribal disbursements from casino earnings.

Remember: You must live on and have income derived from sources within Indian country in Oregon
and be an enrolled member of a federally recognized tribe to subtract the income listed above. You
do not have to live in and have income from the same Indian country. But the areas where you live and have income from must both be Indian country to qualify for the subtraction.

To claim the subtraction, you must report your total income on both the federal and Oregon tax returns. 

You must file a completed copy of the Exempt Income Schedule for Enrolled Members of a Federally Recognized American Indian Tribe, with your Oregon return. Download the schedule or call us for more information. You must include the following information on the schedule:

  • The street address of the place you worked, and 
  • The street address of the place you lived, and
  • The tribe you are enrolled with and your membership number.

You must use the street address of your residence on the schedule so we can verify that you lived in Indian country when you earned your income. However, you may use your post office box address on your tax return.

If you meet all of the requirements, you may claim “exempt” on your Form W-4 for Oregon purposes only. 

Income earned in Oregon, outside of Indian country, will be taxed by Oregon. Also, any Oregon income earned by a member not living in Indian country will be taxed by Oregon. Each member of a household with income must meet these qualifications in order to claim the subtraction of their income.

If you are an enrolled member of a federally recognized tribe and a member of the U.S. Armed Forces, stationed in Oregon, you may be entitled to an additional subtraction. For more information, call us.

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Artist's charitable contribution ORS 316.838

[Subtraction code 301]

Oregon allows a subtraction to artists who contribute their own works of art to a recognized charitable organization or governmental unit.

What qualifies as a "work of art"?

The art object must qualify for the deduction allowed by IRC Sec. 170. It must be a painting, sculpture, photograph, graphic or craft art, industrial design, costume or fashion design, tape or sound recording, or film.

The charitable organization is not required to use the art for the same purpose or function that qualifies it for its federal tax exemption. You may deduct your charitable contribution even if the charitable organization sells the art.

You will need the appraisal report showing the fair market value of the art at the time of the contribution. You must send a copy of the appraisal report with your return.

How to calculate the subtraction

The subtraction is equal to the difference between:

  1. The amount that would have been allowed as an itemized deduction if you could deduct the fair market value of the art (subject to the federal contribution limit)*, and
  2. The actual allowable amount as an itemized deduction under federal tax law.

* Federal law limits charitable contributions. Contributions to some organizations are limited to 50 percent of your federal adjusted gross income (AGI). Contributions to others are limited to 30 percent of your AGI. Use these limits when you figure your deduction.

Example: Ronda's AGI is $10,000. She donated one of her paintings to an organization for display in a building. The painting has a basis (cost) of $300 and a FMV of $6,000. Here is how she computes her subtraction:

1. Amount allowed as a charitable contribution if computed using FMV. $6,000
2. Amount allowed as a charitable contribution limited to 50% of AGI.   $5,000
3. Lesser of line 1 or line 2. $ 5,000
4. Amount allowed as a charitable contribution on federal Schedule A (basis). (300)
5. Ronda's subtraction(line 1 minus 2). $ 4,700


Part-year residents and nonresidents. Follow the same rules as a full-year resident. You do not have to prorate this subtraction.

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Capital Construction Fund ORS 316.048

[Subtraction code 339]

If you subtracted your contributions to your qualifying capital construction fund (IRS Publication 595) on your federal return, you may also subtract that amount on your Oregon return.

The subtraction for Oregon is the same as the amount you identified as "CCF" and subtracted on Line 43 of your federal return.

Part-year residents and nonresidents. Enter the full subtraction in the federal column of your Oregon return. The amount allowed in the Oregon column is the Oregon percentage of your fishing trade or business that qualifies you for a CCF account.

Example: Greg moved out of Oregon in May and continued his fishing business in California. His Oregon net fishing income is $10,000 and his California net fishing income is $30,000. He put $15,000 into his CCF account during the past year. On his Oregon return, Greg will enter $40,000 for his fishing income in the federal column and $10,000 in the Oregon column. Greg's CCF subtraction in the federal column is the full $15,000. Since 25 percent of his eligible income was Oregon source, he is allowed a CCF subtraction of $3,750 ($15,000 x 25%) in the Oregon column.

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Construction worker and logger commuting expenses ORS 316.812, 316.832

[Subtraction code 303]

If you are a qualified construction worker or logger, you may deduct certain commuting expenses on your Oregon return. To claim these expenses, you must have worked at one or more construction projects or logging operation sites more than 50 miles from your home.

A construction project is construction, alteration, repair, improvement, moving, or demolition of a structure. A logging operation is the commercial harvesting of forest products. People in other occupations are not eligible for this subtraction. Management personnel are not eligible for this subtraction either.

Qualifying workers. Loggers must be fallers or buckers who maintain their own equipment and are paid on a per-unit-cut basis. Construction workers must be members of a recognized trade, craft, or union.

Qualifying expenses. You may claim only the actual cost of gas, oil, repairs, and maintenance for your vehicle for getting to and from work sites that are over 50 miles from your home. You cannot use a standard mileage rate to figure expenses.

If you use your vehicle both for business and personal purposes, you must determine your portion of business use. Keep a mileage log book during the year to track your business use and record all business trip miles. You should also record your starting and ending odometer reading for your vehicle each year. You may claim only the business portion of your repairs and maintenance as commuting expenses. You cannot claim depreciation. To claim the actual business expenses for your qualified commute miles, you will need to keep your vehicle records during the year. Keep receipts for all your fuel (e.g., gas, diesel), oil change, repair, and maintenance costs in your permanent tax records.

Example: Ewan is a construction worker. He uses his truck for both personal and business purposes. He worked on three construction jobs during the year. Two of the jobs were located more than 50 miles away from his home. Ewan kept a log book in his truck and recorded each trip to and from the construction sites. He also kept a record of his truck expenses - his receipts for diesel fuel, oil changes, repairs, and maintenance for the year. These receipts totaled $4,215.

Ewan's odometer readings were: 

 

Year end: December 31 38,306
Year beginning: January 1 26,327
Total miles driven 11,979

Ewan's mileage log book showed that his mileage to and from qualified construction job sites totaled 4,716 miles.

He will use this formula to determine the business use of his truck and the amount of truck expenses which will qualify for this subtraction:

Qualified construction miles ​ ​X ​ ​actual expenses ​ ​= ​ ​Subtraction
Total miles driven

 

4,716 ​ ​X ​ ​$4,215 ​ ​= ​ ​$1,659
11,979
 
Ewan will claim a subtraction of $1,659 on his Oregon return.

Duration of project. If you are a construction worker, claim only your expenses for the first year of continuous employment at any one construction site. If your employment continues beyond one year, the job site is considered permanent. You may not subtract any additional commuting costs for going to and from that site after the first year at that worksite. If your employment at that job site is temporarily interrupted, do not count the interruption when you figure the one-year limit.

If you are a logger, there is no limit on how long you can work at the same job site and still claim expenses.

How to claim the subtraction. Claim your commuting expenses as an "other subtraction" on your Oregon return. You cannot subtract expenses related to the same mileage claimed as an employee business expense on your Schedule A.

Part-year residents and nonresidents. You can claim only expenses related to income included on your Oregon return.

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Conversions and exchanged property ORS 314.290 (repealed), 316.716

[Subtraction code 306]

Oregon law used to require an addition for gain on the sale or exchange of certain property deferred on the federal return. This statute was repealed in 2001. If you were required to make this addition before 2001, you have already been taxed by Oregon for the gain on the sale or exchange of your property. If this gain is now included in your federal income, you may claim a subtraction for the amount of the gain previously taxed by Oregon.

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DISC dividend payments ORS 316.749

[Subtraction code 352]
Oregon allows a subtraction for the dividend payments your received from a domestic international sales corporation (DISC).

You can claim the subtraction if all of the following are true:
  • The DISC dividend payments are included in your federal adjusted gross income, and
  • The DISC was formed on or before January 1, 2014, and
  • The DISC is subject to the 2.5% tax.
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Discharge of indebtedness from reacquisition of debt instrument ORS 316.739

[Subtraction code 350]

Did you claim an addition (addition code 128) for discharge of indebtedness from reacquisition of a debt instrument on your 2009 or 2010 Oregon return? Are you claiming the deferred income on your federal return? If you answered yes to both of these questions, you may claim a subtraction on your Oregon return for the amount of deferred income you have included on your federal return. Generally, on your federal return you were allowed to defer the income until 2014 and then must claim it over a 5-year period. Claim the subtraction on your Oregon return in the year(s) you claim the deferred income on your federal return.

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Federal income tax liability ORS 316.680, 316.685, 316.695

Current year's federal tax liability. Oregon allows a subtraction for your current year’s federal income tax liability after credits. The subtraction for 2014 is limited to $6,350 ($3,175 if married/RDP filing separately).

The subtraction is based on the accrual method of accounting. This means you subtract the total amount of your federal tax liability after credits for the current tax year (not less than zero) as shown on your original return, regardless of when you pay it. 

The subtraction is limited to income tax. This includes alternative minimum tax, tax on an IRA (Individual Retirement Arrangement), and recapture taxes. You cannot include self-employment tax or Social Security (FICA) tax.

Federal income tax credits, excluding the earned income credit, reduce your federal tax subtraction.
The credits for federal tax on special fuels, special oils, and a regulated investment company will not
reduce your federal tax subtraction. 

You can deduct your federal income tax liability after credits, up to $6,350 ($3,175 if married/RDP filing separately) based on your income and filing status. Do not fill in less than ‑0‑ or more than $6,350. Use the federal tax worksheet to figure your federal income tax liability. 

RDPs: Use amounts from your actual return(s), not your “as if” return. 

Additional federal income tax paid or determined [Form 40 subtraction code 309; 40N and 40P deduction code 602]. If you paid additional federal tax because your federal return was amended or audited, you may subtract it in the year the tax was paid or determined, whichever is later. Your additional prior year’s federal tax plus your current year’s federal tax cannot be more than your current year federal tax subtraction limit. 

This subtraction applies only to additional federal income tax paid because your return was amended or audited. It does not include withholding tax, advance tax payments, interest, penalties, or paying the tax due on your original federal return. Use the federal tax worksheet, part B, to figure your federal tax from a prior year.

Amended returns. If your federal tax liability for a prior year is changed, follow these rules when filing an amended Oregon return for that year:

  1. Additional federal tax paid or determined: If you are filing an amended Oregon return to report changes made to your federal return, do not increase the federal tax subtraction. Report the additional federal tax in the year the tax was paid or determined, whichever is later.
    Exception. Any amended Oregon return filed before the due date (excluding extensions) for that tax year should show the corrected federal tax liability. This is true even if you have not yet paid the additional tax.
  2. Refund of federal tax: Do not change the federal tax subtraction on your amended Oregon return. Report your federal refund as an addition in the year you receive the refund if you received a tax benefit. For information about tax benefit, see federal income tax refunds. Exception. If you file an amended return before the due date (excluding extensions) for the tax year involved, report the corrected federal tax liability. Do not report the refund in the year you receive it.


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Federal Tax Worksheet

Part A: Federal Tax Subtraction

​1. Enter your federal tax liability from Form 1040, line 55; Form 1040A, line 37; Form 1040EZ, line 10; Form 1040NR, line 53; or Form 1040NR-EZ, line 15. ​1.                
​2. Enter your tax on qualified retirement plans from Form 1040, line 46;Form 1040A, line 29; or Form 1040NR, line 44. ​2.                ​
​3. Subtract 2 from line 1. (If less than -0-, enter -0-.) ​3.                ​
​4.



Enter your additional tax on retirement plans from Form 1040, line 59; or Form 1040NR, line 57; your first-time homebuyer credits recapture;* any recapture taxes you included as "other taxes" on Form 1040, line 62, or Form 1040NR, line 60; and the amount on Form 1040NR, line 454.


4.
               ​
​5. Add lines 3 and 4 ​5.                ​
​6.
Enter your American opportunity credit from Form 1040, line 68; or Form 1040A, line 44.
6.
               ​
​7. Enter your total premium tax credit from Form 8962, line 24. ​7.                ​
​8.
Add lines 6 and 7. ​8.
              
​9. Subtract line 8 from line 5. (If less than -0-, enter -0-). ​9.                ​
​10. Enter your maximum allowable tax liability subtraction from the table. Don't fill in less than -0- or more than $6,350.
10.​
​11. ​Enter the smaller of line 9 or line 10 here and on Form 40, line 13; or Form 40N or 40P, line 45. ​11.

*Did you file federal form 5405? If you are required to repay your 2008, 2009, or 2010 first-time homebuyer credit because you disposed of your home or stopped using it as your main home, you may subtract your federal tax recapture. Add the amount reported on your federal form 1040, line 59b, or federal form 1040NR, line 58b, to the amount included on line 2 of the worksheet above. Do not add this amount if you are repaying your 2008 credit and still live in your qualifying home as your main residence.
 

Part B: Federal tax paid in a prior year

[Form 40 subtraction code 309]

[Forms 40N or 40P deduction code 602]

1. Enter maximum amount from table (Part A, line 10). 1.                
2. Enter federal tax liability subtraction (Part A, line 11). 2.                
3. Subtract line 2 from line 1. If the result is -0-, you cannot deduct your federal tax from a prior year. If greater than -0-, enter the amount on line 3. 3.                
4. Enter the amount of federal tax you paid in 2014 for a prior year. 4.                
5. Enter the smaller of line 3 or line 4 here and on Form 40, line 18 (subtraction code 309) or Form 40N or 40P, line 46 (deduction code 602). 5.                


Part C: Foreign tax subtraction

[Form 40 subtraction code 311]

[Forms 40N or 40P deduction code 603]

1. Enter maximum amount from table (Part A, line 10). 1.                
2. Enter your federal tax liability subtraction (Part A, line 11). 2.                
3. Subtract line 2 from line 1. 3.                
4. Enter federal tax from a prior year (Part B, line 5). If no tax was paid, enter -0-. 4.                
5. Subtract line 4 from line 3. If the result is -0-, you can't deduct your foreign tax. If greater than -0-, enter the amount on line 5. 5.                
6. Enter the amount paid in foreign tax, but not more than $3,000 ($1,500 if married/RDP filing separately). 6.                
7. Enter the smaller of line 5 or line 6 here and on Form 40, line 18 (subtraction code 311) or Form 40N or 40P, line 46 (deduction code 603). 7.                

If your filing
status is:

and your federal adjusted gross income is:

then your
maximum allowable tax liability subtraction is:

at least -

but less than -

Single


-0-

$125,000

$6,350

$125,000

$130,000

$5,050

$130,000

$135,000

$3,800

​$135,000 ​$140,000 ​$2,500
​$140,000 ​$145,000 ​$1,250
$145,000 or more​ ​ ​-0-
Married/RDP filing separately
​-0- ​$125,000 ​$3,175
​$125,000 ​$130,000 ​$2,525
​$130,000 ​$135,000 ​$1,900
​$135,000 ​$140,000 ​$1,250
​$140,000 ​$145,000 ​$625
​$145,000 or more ​ ​-0-

Married/RDP filing jointly

or

Head of household

or

Qualifying widow(er)

-0-

$250,000

$6,350

$250,000

$260,000

$5,050

$260,000

$270,000

$3,800

$270,000

$280,000

$2,500

$280,000

$290,000

$1,250

$290,000 or more

-0-

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Federal pension income ORS 316.680(1)(f)

[Subtraction code 307 for 40N and 40P only]

You may be able to subtract some or all of your taxable federal pension included in federal income. This includes benefits paid to the retiree or the beneficiary. It does not include disability payments if you have not attained the minimum retirement age. The subtraction amount is based on the number of months of federal service or points earned for retirement before and after October 1, 1991:

  • If all of your months of federal service occurred or points were earned before October 1, 1991, subtract 100 percent of the taxable federal pension income you reported on your federal return.
  • If you have no months of service or points earned before October 1, 1991, you cannot subtract any federal pension.
  • If your service occurred or points were earned both before and after October 1, 1991, you will subtract a percentage of the taxable federal pension income you reported on your federal return.

To determine your percentage, divide your months of service or points earned before October 1, 1991, by your total months of service or points earned. Round your percentage to three places (example: 0.4576 = 45.8%). Once you determine the percentage, it will remain the same from year to year.

Example 1: Jared worked for the U.S. Department of Agriculture from May 1, 1977, until July 31, 2012. He worked a total of 423 months - 173 months before October 1, 1991. In 2014, he received federal pension income of $65,000. He can subtract 40.9 percent (173 ÷ 423) or $26,585 (.409 x $65,000) of his federal pension. Jared will continue to subtract 40.9 percent of his federal pension from Oregon income in future years.


Use this worksheet to determine your federal pension income subtraction amount:

1.

Federal pension income included in federal AGI.

1.

$________

2.

a.

Months of service or points earned from _______ (fill in federal service start date) to October 1, 1991.

a. ________ months*/points




b.

Months of service or points earned from _______ (fill in federal service start date) to _______ (fill in federal service retirement date).

b. ________ months**/points




Divide the number of months or points on line a by the total number of months or points on line b. This is your federal pension subtraction percentage. Round the decimal to three places and enter it here.

2.

________

3.

Multiply line 1 by the decimal on line 2. This is your federal pension subtraction.

3.

$_______


*




Federal service start date: If your federal service start date was the 1st through the 15th of a month, include the entire month when counting federal service.

If your federal service start date was the 16th through the end of a month, do not include the first partial month of service. Start counting the months of federal service with the first full month.




**






Federal service retirement date: If your federal service retirement date was the 1st through the 15th of a month, do not count this final partial month when counting the total months of federal service.

If your retirement date was the 16th through the end of the month, include the entire month when counting the total months of federal service.

Keep a copy of this worksheet with your permanent tax records. You will continue to use the same percentage, from line 2, to determine your federal pension subtraction in future years.




Example 2: Robin served in the U.S. Army Reserves from June 20, 1987 through May 18, 2012. As a retired member of the reserves, Robin's service is easier measured by the retirement points she earned. Her Chronological Statement of Retirement Points shows that she earned 1,917 retirement points before October 1, 1991, out of a total 3,510. Robin received $25,000 in pension benefits in 2014. The following worksheet shows how she will determine her federal pension subtraction.

 

​1.

Federal pension income included in federal AGI. ​1. $25,000
​2.
​a. Points earned before October 1, 1991. ​a. 1,917 points
​b. Total points earned. ​b. 3,510 points
Divide the number of points on line a by the total number of points on line b.
Round the decimal to three places. This is Robin's federal pension subtraction percentage.
​2. ​0.546
​3.


Multiply line 1 by the decimal on line 2. This is Robin's federal pension subtraction. ​3. $13,650
 


Federal Thrift Savings Plan. Once a taxpayer is a retiree, withdrawals from federal thrift savings loan (TSP) accounts are eligible for the subtraction based on dates of service. Withdrawals prior to retirement are not eligible because the taxpayer must be a retiree at the time of withdrawal to be eligible for the subtraction . If the taxpayer moves money from a TSP to another type of account, the account loses its character and is no longer a federal pension. In this case, future withdrawals would not be eligible for the subtraction.

Nonresidents. Claim a subtraction for federal pension income only if you reported it on your Oregon return. Oregon does not tax your retirement income unless you have kept Oregon as your domicile. For more information, see the retirement income section.

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Federal tax credits ORS 316.716

[Subtraction code 340]

If you qualify for certain federal tax credits, you must reduce your business expenses or itemized deductions on your federal return by the amount of the credit you figured for the year. Oregon allows a subtraction or itemized deduction for the amount of expenses you could not claim on your federal return. Subtract these expenses on your Oregon return in the year you first claimed the federal credit, even if the federal credit is carried over. If you had to itemize deductions to claim these expenses for federal purposes, then you must itemize for Oregon as well.

Part-year residents and nonresidents. If your federal credit is related to a business not operated solely in Oregon, you must prorate your subtraction. Use the following formula to determine your Oregon subtraction or deduction:

 

Oregon expenses ​ ​X ​ ​Expenses not allowed on your federal return
Total expenses*
 

 

If your federal credit is related to a business operated entirely in Oregon, you will not prorate your Oregon subtraction.

*Do not reduce by your federal credit.

Partnerships and S corporations. If your federal credit is from a partnership or S corporation, you may subtract a percentage of the expenses not deductible on your federal partnership or S corporation return. This amount will usually be the same as the percentage of total partnership or S corporation income you report on your return. Nonresidents or part-year residents must use the percentage explained in the previous paragraph to further prorate the expenses.

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Foreign income tax ORS 316.690

[Form 40: Subtraction code 311]

[Forms 40N/40P: Deduction code 603]

You can subtract taxes paid to a foreign country if on your federal return:

  • You claimed a credit for taxes you paid to a foreign country, or
  • You did not claim a credit for tax you paid to a foreign country and you did not claim the foreign taxes as an itemized deduction.

Your foreign tax plus your current federal tax (and any additional federal tax paid for a prior year) cannot be more than $6,350 for 2014. The foreign tax portion of your federal tax subtraction cannot be more than $3,000 ($1,500 if married/RDP filing separately).

If you claimed foreign taxes as an itemized deduction on your federal return, you may claim them in full on your Oregon return as part of your itemized deductions. The amount shown on your federal Schedule A is not subject to the $6,350 limit. If you claim the foreign taxes as an itemized deduction, you may not also claim them as a subtraction.

Your foreign tax subtraction is the smallest of:

  • Your 2014 foreign tax, or
  • The maximum 2014 federal tax subtraction of $6,350 reduced by the sum of the 2014 federal tax you are claiming plus any prior year federal tax paid in 2014, or
  • $3,000 ($1,500 if married/RDP filing separately).

Use Part C of the Federal Tax Worksheet to figure your foreign tax subtraction or deduction.

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Income from a composite return OAR 150-314.778(3)(d)

[Form 40N/40P only: Subtraction code 341]

If you are an electing owner of a pass-through entity (PTE), you may need to file a personal income tax return in addition to the Oregon composite return that is filed on your behalf by the PTE. This is necessary when you have other Oregon-source income to report.

File Form 40N if you have income not already reported on a Form OC. Follow the instructions in our booklet for Form 40N. Enter all income (including income reported on the Form OC) in the federal column, line 18F, of your Form 40N. Also, enter all Oregon-source income (including Oregon-source income reported on Form OC) in the Oregon column, line 18S, of your Form 40N. Because the income reported on Form OC has already been taxed, you will subtract that amount in the federal and Oregon columns, lines 37F and 37S, on Form 40N. Identify the subtraction using code 341.

Note: Do not claim the tax paid on your behalf by the PTE as a payment on your Form 40N. That payment was already used to pay the tax on the income reported on Form OC.

For more information, see the Oregon Composite Return instructions or contact us.

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Individual Development Account ORS 316.848

[Subtraction code 314]

For information on the Oregon subtraction, see Individual Development Account on the other items page.

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Interest and dividends on U.S. bonds and notes ORS 316.680(1)(a)

[Forms 40N/40P only: Subtraction code 315]

Did you include any interest or dividends from U.S. bonds and notes in your federal income? If so, you may subtract this income on your Oregon return. Common examples of U.S. government interest include savings bond and Treasury bill interest.

You may also subtract U.S. government interest (called state exempt-interest dividends) from regulated investment companies and pools of assets managed by a fiduciary. These include, but are not limited to, banks, savings associations, or credit unions. To qualify, the regulated investment company or pool of assets must invest in U.S. government securities. These securities must be tax-exempt for Oregon. The subtraction is limited to your share of the amount of interest actually earned from the qualifying U.S. government securities. See the list below.

You cannot subtract amounts when the U.S. government only guarantees the security. If you receive distributions from a retirement plan, you may not subtract pension income received from funds invested in U.S. government securities.

Part-year residents and nonresidents. You may claim the subtraction only for interest and dividends you included as income taxable by Oregon.

Any gain recognized for federal tax purposes on the sale of U.S. bonds and notes is also taxable by Oregon.

If you claim related expenses

Special treatment is required if you claim expenses connected with U.S. bonds and notes as an itemized deduction. The expenses include interest on money borrowed to buy the bonds and notes. They also include expenses incurred in the production of income from the bonds and notes. Because Oregon does not tax the income from these bonds and notes, it doesn't allow a deduction for the expenses. You must reduce your subtraction by the amount of the expenses you deducted on your federal return.

Example: Charles earned $620 of interest income from his Series EE bonds. He had borrowed $6,000 to buy the bonds. During the year he paid $200 interest on the loan. He included the $200 interest expense as an itemized deduction on his Schedule A. His Oregon subtraction will be $420.

 

Series EE bond interest received $620
Interest expense connected with bonds and deducted on Schedule A -200
Oregon subtraction $420
 
Below is a detailed list of bonds and notes that may or may not qualify for this subtraction. Read Interest and dividents on government bonds for a list of obligations that are exempt from both state and federal tax ratio.

 

QUALIFIES BOND/NOTE
Yes Banks for Cooperatives District of Columbia
Yes Commodity Credit Corporation
No* Export-Import Bank
No Farmers Home Administration
Yes Federal Deposit Insurance Corporation
Yes Federal Farm Credit Bank
Yes Federal Financing Bank
No Federal Home Loan Mortgage Corporation (Freddie Mac)
Yes Federal Home Loan Bank
Yes Federal Intermediate Credit Bank
Yes Federal Land Bank and Federal Land Bank Association
No Federal National Mortgage Association (Fannie Mae)
Yes Federal Savings and Loan Insurance Corporation
No Federal tax refunds
Yes Financing Corporation (FICO)
Yes General Insurance Fund
No* Government National Mortgage Association (Ginnie Mae)
Yes Government Services Administration (GSA Public Building Trust Participation Certificate)
No International Bank for Reconstruction and Development
Yes Production Credit Association (PCA)
Yes Resolution Funding Corporation (REFCO)
No Repurchase agreements (Repos)
Yes Series EE, HH, and I Bonds
No* Small Business Administration
Yes Student Loan Marketing Association (Sallie Mae)
Yes Tennessee Valley Authority
Yes Treasury bills and notes - interest
No Treasury bills and notes - gain on sale
No U.S. Merchant Marine bonds
Yes U.S. Postal Service bonds
No* Washington (D.C.) Metropolitan Transit Authority
Yes Zero coupon obligations of the U.S. (for example, "CATs," "STRIPS," "TIGRs," etc.)
 

* If the creditor has defaulted and the U.S. government/Export-Import Bank is paying the interest, it is nontaxable.

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Land donations to educational institutions ORS 316.852

[Subtraction code 316]

This provision expired December 31, 2007. However, if you had a qualifying donation or sale prior to that date, you may still have contribution amounts to carryforward.

The subtraction allowed in any tax year is limited to a specific percentage of your contribution base. Your contribution base is federal adjusted gross income computed without any net operating loss carryback.

If you donated land to a qualified entity, your Oregon subtraction cannot be more than 50 percent of your contribution base.

If you sold land to a qualified entity for less than its fair market value, the Oregon subtraction cannot be more than 25 percent of the contribution base.

Example 1: In tax year 2007, Marykate has a contribution base of $100,000. She sells land with a fair market value of $500,000 to a local school district for $200,000 cash. Marykate's contribution of $300,000 is limited to 25 percent of her contribution base. In 2007 Marykate can claim an Oregon subtraction of $25,000.

Carryforward. You can carry forward for a maximum of 15 years any contribution you do not subtract because it is more than the specified percentage of the contribution base. Any contributions not subtracted by 2022 will be lost.

Example 2: Using the same facts as in Example 1, Marykate can carry forward her remaining $275,000 contribution to the next tax year. Her subtraction will be limited by her contribution base for 2008 and each year thereafter.

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Local government bond interest ORS 286A.140

[Subtraction code 317]

You can subtract interest or dividends on obligations of counties, cities, districts, ports, or other public or municipal corporations or political subdivisions of Oregon to the extent included for federal income tax purposes.

Reduce the amount subtracted by any interest on debt incurred to carry the obligations or securities. Also reduce the amount by any expenses incurred in the production of interest or dividend income.

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Lottery winnings ORS 461.560

[Subtraction code 322]

Oregon will not tax your winnings from an Oregon Lottery ticket or play that results in winnings of $600 or less. Individual Oregon Lottery winnings of more than $600 per ticket or play are taxed by Oregon and are not eligible for the subtraction.

“Oregon Lottery” means all games offered by the Oregon State Lottery commission and purchased
in Oregon, including games jointly administered by Oregon and other states (such as Powerball). Oregon Lottery does not include gambling winnings from other sources, such as tribal gaming centers.

Winnings over $600 from a single ticket or play are fully taxable and may be reported by Oregon Lottery on Form W-2G. Lottery winnings that are more than $5,000 will have eight percent withheld for Oregon taxes. If state income tax was not withheld from your gambling winnings of $5,000 or more, you should consider making estimated tax payments or increasing your withholding. See our estimated tax page for information about increasing Oregon income tax withheld from your wages.

Do you have gambling losses claimed as an itemized deduction? If so, see gambling losses for information about your Oregon addition. If you are an American Indian, see the corresponding section.

Example: Margaret purchased two Oregon Lottery tickets and won $1,000 on one ticket and $500 on the other. She also won $300 from a lottery ticket she bought in Idaho, and $150 on a slot machine at an Oregon casino. Margaret included all $1,950 in winning on her federal return. Margaret can subtract $500 of her Oregon Lottery ticket winnings on her Oregon return using code 322.

Nonresidents: Oregon Lottery winnings are taxable to nonresidents. Oregon Lottery winnings included in federal taxable income are eligible for the subtraction when winnings per ticket or play are $600 or less. 

Exception for pre-1998 tickets: You may subtract all Oregon Lottery winnings included in your federal income from tickets purchased prior to January 1, 1998. Did you assign your lottery winnings to a private company and receive a lump-sum settlement? If so, your settlement is not taxable by Oregon if your winning ticket was purchased before January 1, 1998. Winnings form tickets purchased on or after January 1, 1998 are fully taxable.


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Mobile home park capital gain exclusion Note following ORS 316.791

[Subtraction code 338]

Amounts received from the sale of a mobile home park to a tenants' association are exempt from Oregon income tax.

If you included this gain in income on your federal return, you may claim a subtraction for the gain amount on your Oregon return. Enter the amount as an "other subtraction."

To qualify, the park must have been sold to a tenants' association nonprofit organization, community development corporation, or a housing authority.

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Mobile home park payments ORS 316.795

[Subtraction code 344]

Payments received from your former landlord because your mobile home park is being closed are exempt from state taxation. These payments must have been included in your federal income to be subtracted.

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Mortgage interest credit ORS 316.716

[Form 40: Subtraction code 320]

[Forms 40N/40P: Deduction code 607]

  1. Did you claim a mortgage interest credit on your federal return?
  2. Did you claim your mortgage interest as an itemized deduction on federal Schedule A?
  3. Did you reduce your mortgage interest deduction by the federal mortgage interest credit?
  4. Are you also claiming these itemized deductions for Oregon?
If you answered “yes” to all four questions, you will have a subtraction for mortgage interest on the Oregon return. You will claim a subtraction for the amount of mortgage interest credit allowed on your federal return.

Take the subtraction in the year of the payment even if the federal credit is carried forward.


Example 1: Stephanie and Phillip pay $5,000 in mortgage interest this year. They are entitled to a 50 percent credit limited to $2,000 on their federal return. They will claim the $2,000 credit and itemize $3,000 of mortgage interest on Schedule A. For Oregon, they will claim a subtraction of $2,000.

Example 2: Use the same facts as Example 1, except that Stephanie and Phillip’s federal tax liability is $1,500. They will show the $1,500 as a credit on their federal return, itemize $3,000 of mortgage interest on Schedule A, and have a $500 credit to carry over to the following year. Their Oregon subtraction for mortgage interest will be $2,000. They will not carry forward any amount for Oregon.
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Oregon 529 College Savings Network ORS 316.699

[Subtraction code 324]

You can subtract contributions you made to an Oregon 529 College Savings Network account during the tax year of up to $4,530 if you file a joint return ($2,265 for all others). These state-sponsored plans qualify for special tax status as qualified tuition programs under Internal Revenue Code Section 529.

Account holders can save money for college for any designated beneficiary. Once you open an account and select an investment option, the Oregon 529 College Savings Network board and the private investment company manage your investment. 

You can subtract your contribution if you make it before the date you file your tax return or before the due date of your return, without extensions, whichever is earlier.

Example 1: Bella would like to contribute to her niece’s Oregon 529 College Savings Plan. She plans to request an extension to file her 2014 return. For Bella to qualify for the $2,265 subtraction, she must make a contribution of at least that amount no later than the due date of her return, without extensions. Bella must make her contribution by April 15, 2015.

Example 2: Rodrigo made a contribution of $1,800 to his son’s Oregon 529 College Savings Plan on March 10, 2015. He filed his 2013 tax return on March 3, 2015. Because he made his contribution after he filed his 2014 return, he cannot claim the $1,800 subtraction on that return. He can claim the subtraction on his 2015 return.

Carryforward. If you make a contribution of more than the maximum allowable subtraction in one year, you may carry forward the amount not subtracted over the next four years.

Example 3: Korey and Keri contributed $15,000 in 2014 to an Oregon 529 College Savings plan for their son. They may subtract a maximum of $4,530 on their 2014 return. They can carry forward the remaining $10,470 balance of their contribution. 

Funds withdrawn to pay qualified expenses will not be taxed. Qualified withdrawals include expenses for tuition, fees, books, supplies, equipment, and room and board at an eligible educational institution anywhere in the United States and foreign countries. A list of the United States and foreign schools that qualify is on the U.S. Department of Education website at www.fafsa.ed.gov.

You may need to add back funds withdrawn for a nonqualified purpose to the Oregon return as an
“other addition.” See the 529 College Savings Network section on the Additions page.

Corporations and partnerships may establish accounts for individual beneficiaries.
For more information about Oregon 529 plans, go to www.oregoncollegesavings.com or call (866) 772-8464 in Salem.


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Oregon income tax refund ORS 316.695

[Forms 40N/40P only: Subtraction code 325]

Oregon allows a subtraction for Oregon state income tax refunds included in federal income. Oregon does not allow a subtraction for any other state income tax refund.

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Oregon Investment Advantage ORS 316.778

[Subtraction code 342]

Oregon has an income tax exemption program for business development in Oregon. The program is available to both new and expanding businesses. 

Who is eligible for the exemption?
The exemption is an 8-year waiver of all income and excise taxes relating to qualifying business operations. The Oregon Economic and Community Development Department (OECDD) administers this program.

To qualify, a company must create at least five new full-time, year-round jobs. The jobs also have minimum pay requirements. Facility operations must be the first of their kind in Oregon for the company and they must not compete with existing businesses in the area. Areas of Oregon that qualify for development can change from year to year. Local unemployment rates and per capita income data determine eligibility. For a list of qualifying counties, go to Oregon Business' website.

How is a facility certified?
There are two application forms necessary for this program. A preliminary certification is completed before hiring or any construction work is done. An annual certification is then completed for each of the 8 years that the income tax exemption is claimed.

To find out more about this program or download an application form, contact OECDD .

How is the subtraction computed?
The exempt income is determined by multiplying the taxpayer’s federal taxable income by the ratio of their federal adjusted gross income (FAGI) derived from the business over their total FAGI.

The resulting amount is then multiplied by the ratio of the business’ income derived from the business’ sales at the certified facility over its sales from all business activities. This amount is subtracted from Oregon income as an “Other subtraction.”

Nonresident and part-year resident taxpayers
determine exempt income by multiplying only Oregon-sourced federal taxable income in the first step of the computation above. For additional information on determining income derived from qualifying activities, see OAR 150-316.778.


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Previously taxed employee retirement plans ORS 316.159

[Subtraction code 327]

Oregon allows residents to subtract payments from an individual retirement account (IRA), Keogh plan, Simplified Employee Pension (SEP) plan, and certain government plans if another state has already taxed contributions or a portion of the contributions to the plan.

The payments must be included in federal adjusted gross income. All of the following conditions must be met for the contributions to qualify:

  • Contributions were made while a nonresident of Oregon.
  • No previous state income tax deduction, exclusion, or exemption was allowed or allowable at the time contributions were made.
  • No previous state income tax deduction, exclusion, credit, subtraction, or other tax benefit has been allowed for the contributions.
  • Contributions have been taxed by another state.

The subtraction continues until all qualifying contributions are recovered. 

A statement from the payer showing your total contributions and the start date of your benefits will help you figure your subtraction. Keep this statement with your tax records.

Example 1: Judith lived in California. From 1980 to 1996 she contributed to an IRA. In 1980 and 1981 she contributed $1,500 each year. From 1982 through 1996 she contributed $2,000 each year.
Both federal and California allowed a maximum deduction of $1,500 for 1980 and 1981. For 1982 through 1986, federal allowed a maximum of $2,000, and California allowed a maximum of $1,500. Both federal and California allowed a maximum of $2,000 for 1987 through 1996. 

Judith contributed $2,500 ($500 × 5 years) from 1982 through 1986 that she was not allowed to deduct on her California returns. Judith retired and moved to Oregon in November 2013. She receives payments of $1,000 a month from the California IRA. These payments are subject to Oregon tax because she is now an Oregon resident. However, Oregon will allow Judith to subtract the contributions that California has already taxed ($2,500).

Judith received two payments of $1,000 in 2014 for a total of $2,000. She can subtract the entire $2,000 on her 2014 Oregon return. In 2015, she will be able to subtract the balance of $500 ($2,500–2,000) as long as
she receives at least that much from her California IRA. From that point on, no subtraction on the Oregon return for recovery of contributions is allowed.


Example 2: Use the same facts as in Example 1, except Judith lived and worked in Washington before moving to Oregon. When she made contributions, she was allowed a federal deduction each year. However,
she didn’t get a state tax deduction, because Washington does not have an income tax. After retiring and moving to Oregon, Judith receives the same payments as above. She does not qualify for the Oregon
subtraction because her contributions were not taxed by another state.

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Previously taxed IRA conversions ORS 316.680(1)(g)

[Subtraction code 348]

Oregon allows a subtraction for converting a traditional individual retirement account (IRA) to a Roth IRA, if the IRA is taxed by another state. You must include the payments in federal taxable income to claim the subtraction.

Example: Susan lived in New York in March 2014, when she converted her $100,000 traditional IRA to a Roth IRA.

In September, she moved to Oregon. New York state will tax her IRA when she becomes a nonresident. Susan can subtract the amount included in federal income when she files her 2014 Oregon tax return.

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Public Safety Memorial Fund Awards ORS 316.680(1)(h)

[Subtraction code 329]

You may subtract from Oregon income amounts awarded to you by the Public Safety Memorial Fund Board. The award must be included in federal taxable income to claim the subtraction.

Public Safety Memorial Fund Awards are for public safety officers with certain job-related permanent total disabilities. These awards are also available to family members of a public safety officer who is killed in the line of duty or while interceding in a crime.

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Railroad Retirement Board benefits ORS 316.054

[Subtraction code 330]

The Railroad Retirement Act of 1974 prohibits states from taxing certain railroad benefits. This act pertains to all benefits issued by the Railroad Retirement Board. Oregon allows a subtraction for Tier
1 Railroad Retirement Board benefits (the same as for Social Security benefits). Oregon Administrative Rule 150-316.054 extends the subtraction to the other supplemental Railroad Retirement Board benefits including Tier 2, windfall, vested dual, supplemental annuities, unemployment, and sickness.

Tier 1 benefits. Tier 1 benefits are reported like Social Security on your federal return. Subtract these benefits with Social Security on the Oregon return.

Tier 2, windfall, vested dual, supplemental annuities, unemployment and sickness paid by the Railroad Retirement Benefits Board. These benefits are reported on the private pension line of your federal return. Subtract these benefits on the “other subtraction” line on your Oregon return.

Other benefits. A retired railroad employee may receive other retirement benefits from their employer. Benefits paid by private railroad employers are private pensions taxed the same on both the federal and Oregon returns. There is no Oregon subtraction for retirement benefits paid by private railroad employers. 

Only benefits paid by the Railroad Retirement Board qualify for the subtraction. Railroad Retirement Board benefits are reported on a 1099. All are labeled Form RRB-1099-R. Tier 1 benefits are on a blue 1099. Other benefits are shown on a green 1099. More information on Railroad Retirement Board benefits is available on the board’s website at www.rrb.gov.

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Scholarship awards used for housing expenses ORS 316.846

[Subtraction code 333]

You can subtract scholarships used for housing expenses from Oregon income. You must include the scholarship in federal taxable income for the year to claim the subtraction.

You can claim the subtraction if the scholarship was awarded to you or your dependent. You can subtract only the amount used for housing expenses for the scholarship recipient. The recipient must attend an accredited community college, college, university, or other institution of higher education.

You may not take a subtraction for expenses that are deducted on your federal income tax return for the year. Your subtraction cannot be more than the amount of scholarship income included in federal taxable income. There is no carryforward allowed.

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Social Security benefits ORS 316.054

Oregon does not tax Social Security benefits. Any Social Security benefits included in your federal adjusted gross income are subtracted on your Oregon return.

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Special Oregon medical subtraction ORS 316.693

[Subtraction code 351]

If you or your spouse/RDP are age 63 or older on December 31, 2014 and have qualifying medical and/or dental expenses, you may qualify for the special Oregon medical subtraction. See IRS Publication 502 for types of qualifying medical and dental expenses. You cannot subtract medical or dental expenses:
  • For anyone under age 63; 
  • For dependents, regardless of their age; or 
  • That have already been deducted on the return.
You may not claim a subtraction if your federal adjusted gross income is $200,000 or more ($100,000 or more for those who file as single or married/RDP filing separately). Use the worksheet and table below to determine the amount of your subtraction.

Shared Expenses. Did you have medical and/or dental expenses for more than one person? If so, you must determine which expenses belong to each qualifying taxpayer. Start by totaling all expenses for each qualifying taxpayer. If you have expenses that are for more than one person, such as premiums for a shared insurance policy, split the expenses by the most reasonable method. A reasonable method for splitting the shared costs of an insurance policy includes splitting the total cost of the policy by the number of individuals covered. For example, divide the premiums for an insurance policy covering two adults by two. If the number of children covered on an insurance policy does not affect the price of the policy, it is reasonable to count all children on the policy as one individual. For example, divide the premiums for a policy covering two adults and four children by three.

Example 1: Chloe and Sam were ages 63 and 58 on December 31, 2014. They filed a joint return with one dependent (Sam’s mother), federal adjusted gross income of $55,000, and itemized deductions for Oregon. During 2014, they paid $5,700 in medical expenses. Of that, they paid $1,300 for Chloe’s expenses and $1,100 for Sam’s expenses. They also paid $1,300 for Sam’s mother and $2,000 in premiums for a joint insurance policy for Chloe and Sam. Only Chloe’s expenses of $2,300 ($1,300 + $1,000 for half of the insurance premiums) qualify for the special Oregon medical subtraction because Sam does not meet the age requirement and Sam’s mother is a dependent.

Example 2: Peter is 63 years old, self-employed, and itemizes his deductions for Oregon. Peter claimed $3,200 in medical expenses on federal Schedule A and $2,500 on his federal Form 1040 for self-employed medical insurance premiums. Peter was able to deduct 100% of his self-employed medical insurance premiums on his federal return. Only the medical expenses Peter claimed on Schedule A will be used to calculate his special Oregon medical subtraction because they have not been fully deducted. To calculate his subtraction, Peter’s total qualifying medical and dental expenses are $3,200, the amount claimed on Schedule A. The worksheet will help him calculate the amount of his subtraction.

Special Oregon medical subtraction worksheet instructions
Line 1–Medical and dental expenses for each taxpayer: Enter the expenses attributable to each taxpayer. See “Shared expenses” for information about splitting expenses, such as insurance premiums.

Line 1, column (A): If you were age 63 or older on December 31, 2014, enter your total qualifying medical and dental expenses. If your medical expenses were not included in your itemized deductions (Schedule A, line 1), or you didn’t itemize your deductions, skips lines 2 - 4, enter the amount from line 1 on line 5, and go to line 6. If you don’t have qualifying expenses or were not age 63 or older on December 31, 2014—STOP—do not complete column (A). You do not qualify for the subtraction.

Line 1, column (B): If your spouse/RDP was age 63 or older on December 31, 2014, and you’re filing jointly, enter your spouse’s/RDP’s total qualifying medical and dental expenses. If your spouse’s/RDP’s medical expenses were not included in your itemized deductions (Schedule A, line 1), or you didn’t itemize your deductions, skips lines 2–4, enter the amount from line 1 on line 5, and go to line 6. If your spouse/RDP does not have qualifying expenses or was not age 63 or older on December 31, 2014—STOP—do not complete column (B). Your spouse/RDP does not qualify for the subtraction.

Line 2, columns (A) & (B)— Total medical and dental expenses: Enter the total medical and dental expenses you claimed as an itemized deduction (Schedule A, line 1), even if they are for a spouse/RDP or dependent that doesn’t qualify. If your spouse/RDP meets the age requirement and has qualifying expenses, enter this amount on line 2, column (B).

Line 3, columns (A) & (B): Divide line 1 by line 2 for column (A) if you qualify, and/or column (B) if your spouse/RDP qualifies, and round to three decimal places. For example: 0.7308 is rounded to 0.731

Line 4, columns (A) & (B):
Enter the lesser of the medical and dental expenses claimed on line 1 of your Schedule A or the amount claimed on line 3 of your Schedule A. If your spouse/RDP qualifies, enter the same amount in column (B).

Line 5, columns (A) & (B):
Multiply line 3 and line 4 for each column and round to whole dollars. For example: $101.49 is rounded to $101. If you did not itemize your deductions, enter the amount from line 1 of this worksheet.

Line 6, columns (A) & (B): Enter the maximum allowable medical subtraction for your filing status and federal adjusted gross income from the table below. Do not enter more than $1,800. If your spouse/RDP qualifies, enter the same amount in column (B).

Line 7, columns (A) & (B): Enter the lesser of line 5 or line 6 for each column.

Line 8: Add the amounts from line 7 column (A) and column (B). This is your special Oregon medical subtraction. Enter this amount as an “other subtraction” (subtraction code 351) on line 18 of your Form 40, or line 37 of your Form 40N or 40P.

Special Oregon medical subtraction worksheet:

2013 special Oregon medical subtraction worksheet

2014 special Oregon medical subtraction table

Example 3: Leah and Tyler are ages 63 and 59 on December 31, 2014. They file a joint return with federal adjusted gross income of $35,000 and itemize their deductions for Oregon. During 2014, they paid $4,700 in medical and dental expenses claimed on Schedule A, line 1. Of that, $1,600 are Leah’s expenses, $2,000 are Tyler’s expenses, and $1,100 are premiums for a medical insurance policy covering both of them. Only Leah’s expenses qualify for the special Oregon medical subtraction since she met the age requirement as of December 31, 2014. Leah’s expenses are $1,600 plus $550 for her share of the premiums for a total of $2,150. Leah and Tyler will use the special Oregon medical subtraction worksheet to calculate their subtraction as follows:

2013 special Oregon medical subtraction worksheet example 3
2013 special Oregon medical subtraction worksheet example 3.5
Leah and Tyler will claim $1,600 on line 18 of their Oregon Form 40 using subtraction code 351.

Example 4: Kenneth and Sophia were both age 66 on December 31, 2014 and file a joint return with federal adjusted gross income of $78,000. Kenneth and Sophia had $12,300 in unreimbursed medical and dental expenses during 2014. They are self-employed and claimed $3,400 for self-employed health insurance premiums on line 29 of their federal Form 1040. They also claimed $8,900 on line 1 of their federal Schedule A. Of the amount claimed on Schedule A, $1,200 was for Kenneth’s expenses and $7,700 was for Sophia’s expenses. Kenneth and Sophia can claim $2,190 as a special Oregon medical subtraction calculated as follows:
2013 special Oregon medical subtraction worksheet example 2
2013 special Oregon medical subtraction worksheet example 4.5
Because Kenneth and Sophia were able to deduct the entire amount of their self-employed health insurance premiums on their federal return, they do not include that amount in the calculation for their special Oregon medical subtraction. Their subtraction is limited to the lesser of the amount allowed from the table for each individual, or their own medical expenses that have not been previously deducted. Kenneth and Sophia’s subtraction is $2,190 ($790 of Kenneth’s expenses that have not been previously deducted, and $1,400, the maximum amount allowed Sophia).

Example 5: Margaret is age 67 on December 31, 2014, single, and has a federal adjusted gross income of $27,000. During 2014, Margaret paid $1,200 in qualifying medical expenses for herself, and $1,600 in medical expenses for her dependent 9-year-old granddaughter. Margaret does not itemize her deductions because her standard deduction is greater than her itemized deductions for Oregon. Margaret uses the worksheet to calculate her special Oregon medical subtraction as follows:

2013 special Oregon medical subtraction worksheet example 5
2013 special Oregon medical subtraction worksheet example 5.5
The medical expenses paid by Margaret for her 9-year-old granddaughter do not qualify for the subtraction because she is a dependent.

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Taxable benefits for former RDPs OAR 150-316.007-(B)

[Subtraction code 347]

If you and your registered domestic partner (RDP) legally married, or dissolved your partnership during the year, you may be allowed an Oregon subtraction for the imputed value of certain fringe benefits provided by your employer for your RDP for the part of the year you were still registered domestic partners. These benefits typically include, but are not limited to, health insurance and tuition payments. You must have included the imputed valued of the benefits in your federal income to claim the Oregon subtraction. The imputed value will be included in the total compensation (Box 1) shown on your Form W-2.

Example 1: Ruth and Jan entered into an RDP on February 1, 2012. They were then legally married on June 16, 2014. Ruth and Jan must file their 2014 tax return as married filing jointly for both federal and Oregon purposes. They will not file an “as-if” federal return. Instead, they will attach their actual federal return to 150-101-431 (Rev. 10-14) Tuition and fees 73 their Oregon return. Ruth’s employer provides health insurance benefits for Jan, and the imputed value of those benefits were included in Box 1 of Ruth’s 2014 W-2 for the portion of 2014 that Ruth and Jan were not married (January 1st through June 15th). Ruth may claim a subtraction (code 347) for the value of the imputed benefits included in federal income, as reported on her W-2.


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Tuition and fees ORS 316.716(3)

[Subtraction code 308]

Federal law change. The tuition and fees deduction was expired at the time this publication was printed. If Congress did not reinstate this deduction, you can’t take it or the Oregon subtraction on your return, and the following instructions do not apply. If Congress did reinstate this deduction, please follow the instructions below to determine your tuition and fees subtraction.

You may qualify to claim either of the following on your federal return

  • An adjustment to income of up to $4,000 for qualified tuition and fees paid, or
  • The American Opportunity credit or the lifetime learning credit.

If you qualify for and claim the federal income adjustment of up to $4,000 for qualified tuition and
fees, you will not claim a subtraction on your Oregon return. Your federal deduction flows through to your Oregon return via your federal adjusted gross income.

Did you claim the federal American opportunity credit or the lifetime learning credit? If so, you may be able to claim an Oregon subtraction for the amount you could have claimed as an adjustment to income on your federal return, had you elected to claim the deduction for qualified tuition and fees.
You cannot claim the subtraction if:

  • You file married/RDP filing separately;
  • You can be claimed as a dependent by another person; or
  • Your federal modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if married/RDP filing jointly).

Example 1: Tom paid $6,000 in tuition and fees for his son Adam’s higher education this year. Tom elected to claim the American Opportunity credit of $1,500 on his federal return. On his Oregon return, Tom will claim a subtraction of $4,000 for qualified tuition and fees. Tom would have been allowed $4,000 as a deduction on his federal return if he hadn’t elected to claim the American Opportunity credit. 

Example 2: This year Dawn paid $2,200 college tuition for her daughter Camille and $2,400 college tuition for her daughter Delaney. On her federal return, Dawn deducted the maximum $4,000 tuition and fees. Because Dawn claimed the adjustment to income on her federal return, she can’t claim a subtraction on the Oregon return.

Example 3: Mr. and Mrs. Wren paid a total of $6,000 in qualified tuition expenses this year. They paid $2,000 of college tuition for each of their sons, Nelson, Jose, and Chester. On the Wrens’ federal return, they claimed a $2,000 adjustment to income for Nelson’s tuition, a $1,500 American Opportunity credit for Jose’s tuition, and a $1,500 American Opportunity credit for Chester’s tuition. On their Oregon return, they will claim a subtraction for tuition and fees of $2,000.

Here’s how they figure their Oregon subtraction: The maximum subtraction allowable is $4,000. This is the same maximum amount allowed on the federal return. Even though the Wren’s paid $6,000 in tuition and fees, they must reduce their allowable subtraction by any amount they already deducted on the federal return. They already deducted $2,000 for Nelson’s tuition. This flows through to the Oregon return in federal adjusted gross income. Remaining is $2,000 ($4,000 - $2,000) to be subtracted on the Oregon return. Combining the Oregon subtraction with the federal deduction, the Wren’s have reduced their Oregon income by $4,000 of tuition and fees.


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U.S. government interest in IRA or Keogh distribution ORS 316.681

[Subtraction code 331]

Interest and dividends on U.S. bonds and notes are exempt from state tax. See interest and dividends on bonds and notes. Answer the questions below to see if you have a subtraction on your Oregon return for exempt income related to your retirement distributions.

  1. Did you have any distributions from a selfemployed retirement plan or an individual retirement account (IRA)?
  2. Was any part of your self-employed retirement plan or your IRA invested in U.S. bonds and notes?
  3. Did you include your self-employed retirement plan or IRA distribution in your 2014 federal adjusted gross income (AGI)?

If you answered “yes” to all the questions above, you’ll have an “other subtraction” (subtraction code 331) on your Oregon return for the retirement plan exempt earnings included in your distribution.

Use the worksheet below to calculate your subtraction.

Worksheet

​1. Total account balance at year end. 1.​ __________​
​2. Current year distributions. ​2. __________
​3. Line 1 plus line 2. ​3. __________
​4. Total exempt earnings on account at year end. ​4. __________
​5. Total exempt part of distributions from all prior years. ​5. __________
​6. Line 4 minus line 5, but not less than -0-. ​6. __________
​7. Line 6 divided by line 3. Oregon exempt ratio. ​7. __________
​8. Line 2 multiplied by line 7. Oregon exempt portion of current year's distribution. ​8. __________
 

Example: Donna retired last year and began taking distributions of $10,000 each year from her IRA. The IRA is invested in U.S. government securities. Donna uses the following information to calculate her subtraction for years 1 and 2:


Year 1

Year 2

Current year earnings

$4,000

$5,000

Current year distribution

$10,000

$10,000

Account balance at 12/31

$100,000

$95,000

Total exempt earnings on account at 12/31

$ 40,000

$45,000

Worksheet

Year 1

Year 2

1. Total account balance at year end.

$100,000

$95,000

2. Current year distribution.

+ 10,000

+ 10,000

3. Line 1 plus line 2.

$110,000

$105,000

4. Total exempt earnings on account at year end.

$ 40,000

45,000

5. Total exempt part of distributions from all prior years.

- -0-

- 3,636

6. Line 4 minus line 5, but not less than zero.

$40,000

$41,364

7. Line 6 divided by line 3. Oregon exempt ratio.

.3636

.3939

8. Line 2 multiplied by line 7. Oregon exempt portion of current year's distribution.

$3,636

$ 3,939


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