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Net operating losses (NOLs) for Oregon ORS 316.028

[Addition code 116] [Subtraction code 321]

An Oregon net operating loss (NOL) is figured the same as in Internal Revenue Code (IRC) Section
172(c). You may have an Oregon NOL without having a federal NOL, or vice versa. Your Oregon NOL is computed under the federal method and definitions using Oregon sources without Oregon modifications, additions, and subtractions. The only Oregon modification necessary is to subtract prohibited amounts.

Prohibited amounts

Amounts Oregon is prohibited from directly or indirectly taxing include interest earned from Treasury bonds, Treasury notes, and other obligations of the United States.

Carryback and carryforward

For losses incurred in tax years beginning on or after January 1, 2003, the Oregon carryback and carryforward provisions match the IRS.

Oregon does not allow an NOL from a non-Oregon source that occurred while you were a nonresident.

Federal depreciation disconnect

If you have a NOL in 2009 or 2010 and also claim depreciation or expensing that is not allowed by Oregon, your future year subtractions are reduced by the amount already included in the NOL. See depreciation and amortization for additional information.

Computation of the net operating loss
Full-year residents. Generally, the computation of the Oregon NOL for a resident is the same as the federal NOL, except for the prohibited amount modification. (See “Prohibited amounts” above.)

The computation of the Oregon NOL begins with federal adjusted gross income (AGI). Reduce AGI by federal exemptions, federal deductions, and the prohibited amount modification to arrive at the modified Oregon taxable income (OTI). Then adjust the modified OTI as required by IRC Section 172(d). 

Required adjustments are:

  1. Oregon NOL deduction (NOLD) from prior years included in Oregon income after adjustments.
  2. Net Oregon capital loss deduction.
  3. Federal personal exemption amount.
  4. Excess of nonbusiness deductions over nonbusiness income included in modified Oregon taxable income.

Example 1: Maria and Jorge filed joint federal and Oregon tax returns. On their federal return, they reported wages of $26,000, a business loss of $50,000, a gain on the sale of stock of $400, and interest income of $800 from a bank. They reported total itemized deductions of $12,800, which were all nonbusiness, and claimed personal exemptions of $7,900. 

On their Oregon return, Maria and Jorge reported an addition of $500 of municipal bond interest from California that was exempt from federal income tax. Their Oregon NOL ($24,000) is computed as follows:

Federal tax return
Wages $ 26,000
Interest income 800
Schedule C loss (50,000)
Schedule D stock gain 400
Federal AGI ($ 22,800)
Personal exemptions (7,900)
Schedule A deductions (12,800)
Federal taxable income ($ 43,500)
Computation of Oregon NOL
Federal AGI ($ 22,800)
Personal exemptions (7,900)
Schedule A deductions (12,800)
Modified Oregon taxable income ($ 43,500)
Adjustments:
Personal exemptions 7,900
Nonbusiness deductions 12,800
Nonbusiness income (1,200)
Nonbusiness deduction in excess of nonbusiness income 11,600
Oregon NOL ($ 24,000)

Remember:
Compute the Oregon NOL based on federal NOL methods and definitions. Use Oregon sources without Oregon adjustments (modifications, additions, and subtractions), except for prohibited amounts.

Example 2: Use the same facts as in Example 1, except the $800 interest is from U.S. government securities (a prohibited amount). The Oregon NOL for Maria and Jorge is ($24,800), computed as follows:

Federal tax return
Wages $ 26,000
​Interest from U.S. government securities 800
Schedule C loss (50,000)
Schedule D stock gain 400
Federal AGI ($ 22,800)
Personal exemptions (7,900)
Schedule A deductions (12,800)
Federal taxable income ($ 43,500)
Computation of Oregon NOL
Federal AGI ($ 22,800)
U.S. government interest (800)
Personal exemptions (7,900)
Schedule A deductions (12,800)
Modified Oregon taxable income ($ 44,300)
Adjustments:
Personal exemptions 7,900
Nonbusiness deductions 12,800
Nonbusiness income (1,200)
Excess nonbusiness deduction 11,600
Oregon NOL ($ 24,800)

Note: U.S. government interest, a prohibited amount, is not used to compute Oregon NOL.

Part-year residents and nonresidents. You’re allowed an Oregon NOL if it is generated from Oregon sources. Computing Oregon NOL begins with “income after adjustments” from the Oregon column. Reduce this amount by federal exemptions and deductions (attributable to Oregon sources) to arrive at the modified OTI. Then adjust the modified OTI as required by IRC Section 172(d). The required adjustments are the same as those listed in the section about full-year residents in the left-hand column.

You are not allowed an NOL or carryover on an Oregon return if the loss was incurred while you were a
nonresident and was not attributable to Oregon.

Example 3: Ryan and Sallie are married nonresidents and filed a joint return. On their federal return they itemized deductions of $14,000 (all nonbusiness) and claimed personal exemptions of $7,900. They also had a business loss of $25,000 from Oregon sources and $1,000 non-Oregon-source corporate bond interest. Their Oregon percentage is -0-. They computed their Oregon NOL as follows:

Oregon income after adjustments ($ 25,000)
Personal exemptions (7,900)
Schedule A deductions -0-
Modified Oregon taxable income ($ 32,900)
Adjustments:
Personal exemptions 7,900
Nonbusiness deductions -0-
Nonbusiness income -0-
Excess nonbusiness deduction -0-
Oregon NOL ($ 25,000)

Application of an NOL
Oregon NOL carryforward or carryback. Generally, if you carry an NOL back for federal purposes, you must also carry the Oregon NOL back for Oregon purposes. If you elect to carry the federal NOL forward, you must also carry the Oregon NOL forward.

Exception: If you weren’t required to file an Oregon
return before the Oregon loss year, carry back or carry forward the Oregon NOL to the year the loss may be first applied. The total number of years an NOL may be carried back or forward is the same for Oregon and federal.

Example 1: Joe has an NOL for federal and Oregon. Joe carried his federal NOL back. Because he  carried back his loss for federal purposes, he must carry back his loss for Oregon purposes. If he was not required to file an Oregon tax return that year, he may carry back his Oregon NOL to the next succeeding tax year.

Example 2: Assume the same facts as in Example 1. However, Joe was not required to file an Oregon tax return before the year of the loss. Joe can carry his Oregon NOL forward, even if the loss was carried back for federal purposes. Compute an NOLD carryback or carryforward amount in tax years beginning after December 31, 1984, the same way as for federal purposes. For full year residents, the NOL amount is generally the same as for federal purposes, except adjustments made for prohibited amounts (see definition above).

Example 3: Bud and Joyce incurred losses from partnerships and S corporations. They compute an NOL of $12,000 and choose to carry the loss back. Their Oregon carryback year return shows negative taxable income, so the NOL is carried forward to the next year, where the loss is completely absorbed. Bud and Joyce had a federal AGI of $50,000 on that return. The fully absorbed NOL is applied as follows:
Federal AGI on the Oregon return $50,000
Less: NOLD (12,000)
Federal AGI for Oregon as revised $38,000
Additions per Oregon return 3,000
Subtractions per Oregon return ($5,000)
Standard or itemized deductions recomputed for revised federal AGI (15,000)
Total deductions (20,000)
Modified Oregon taxable income $21,000


Example 4: Assume the same facts in Example 3, except that Bud and Joyce choose to carry forward the NOL for federal and Oregon purposes. In the carryforward year, Bud and Joyce have federal AGI of $15,000, reported additions of $8,000 and subtractions of $3,000. Bud and Joyce will apply the NOL and compute the amount available for carryforward to the next year as follows:

NOLD carryforward ($12,000)
Federal AGI on the Oregon return $15,000
Add: Capital loss deductions; or -0-
        Capital gain deduction -0-
Federal AGI for Oregon as revised $15,000
Less: Prohibited amounts (-0-)
         Standard or itemized deductions
         recomputed for revised federal AGI
(12,000)
Modified Oregon taxable income (NOLD) 3,000
Carryforward of NOL available for next year ($ 9,000)
Bud and Joyce's Oregon taxable income is recomputed as follows:
Federal AGI on the Oregon return with loss carried $15,000
Less: NOLD (3,000)
Federal AGI including NOLD $12,000
Add: Additions per Oregon return 8,000
Less: Subtractions per Oregon return (3,000)
         Standard or itemized deductions (12,000)
Oregon taxable income as revised $ 5,000


Part-year residents and nonresidents. Use the federal method without modifications, except prohibited amounts are not considered. Also, the NOLD, carryback, and carryover are based only on amounts attributable to Oregon sources.

Example 5: While residents of California, Ron and Valerie incurred losses from an Oregon partnership creating an $85,000 Oregon-only NOL. Before the loss year, neither Ron nor Valerie needed to file Oregon returns. The next year, Ron and Valerie move to Oregon and file a part-year Oregon return. They report federal income after adjustments of $385,000, Oregon income after adjustments of $235,000, and itemized deductions of $20,000. Ron and Valerie calculate their Oregon taxable income as follows:


Federal ​    Oregon
Income after adjustments $385,000 $235,000
NOLD (85,000) (85,000)
Modified income after adjustments $300,000 $150,000
Plus: "Additions" per Oregon return 7,000 7,000
Less: "Subtractions" per Oregon return (2,000) (2,000)
Modified income after subtractions $305,000 $155,000
Oregon percentage: 155,000 ÷ 305,000 = 50.8%
Less: Standard or itemized deductions recomputed
for revised federal AGI
(20,000)
         Federal tax subtraction -0-*
Oregon taxable income as revised $285,000


*The federal tax subtraction is limited to $0 when federal adjusted gross income is $290,000 or more for joint filers.


Example 6: Scott and Jill live in Vancouver, Washington. Scott operates a business in Oregon. Scott and Jill file a nonresident Oregon return reporting an Oregon-only NOL of $6,000. Scott and Jill elect to carry the NOL forward. In the carryforward year, Scott and Jill report Oregon income after adjustments of $1,600, federal income after adjustments of $32,000, and federal itemized deductions of $13,200. Their Oregon itemized deductions are $660 [($1,600 ÷ $32,000) × $13,200]. Scott and Jill calculate their NOLD and the carryforward to the next year as follows:
NOL ($6,000)
Oregon income after adjustments $1,600
Add: Oregon capital loss deduction -0-
        Oregon capital gain deduction -0-
Modified Oregon income as revised $1,600
Less: Prohibited amounts (-0-)
Oregon percentage of standard or itemized deductions recomputed for revised federal AGI (660)
Modified Oregon taxable income (NOLD) 940
Carryforward of NOL available for next year ($5,060)


Net operating loss as a subtraction. Generally your NOL carryback and carryforward amounts will be reflected in your federal adjusted gross income (AGI). However, if you have an NOL carryback or an NOL carryforward for Oregon only, the loss will not be reflected in your AGI. If your NOL is not reflected in AGI, you'll report your carryback or carryforward on the "other subtraction" line of your Oregon return.

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Depreciation and amortization ORS 316.707 and 316.739

[Addition code 152] [Subtraction code 354]

Your Oregon depreciation deduction is generally the same as for federal purposes. It will not be the same in the following cases:

  • The asset was placed in service in tax years beginning on or after January 1, 1985, and you took the federal investment tax credit on your federal return. 
  • You transferred property into Oregon’s taxing jurisdiction.
  • Assets were placed in service between 1981 and 1985 (Accelerated Cost Recovery System [ACRS] assets), and you did not make the adjustment aligning Oregon basis with federal basis for them. If you made the adjustment on your 1996 tax return, there will not be a depreciation difference.
  • The asset was placed into service during tax years 2009 or 2010 and you claimed “bonus depreciation” or additional expensing under IRC section 168(k) or 179. For tax years 2009 and 2010, Oregon generally allowed the same expensing of qualifying assets under IRC sections 168(k) and 179 as allowed under 2008 federal law. Because of this disconnect an addition is required, leaving a higher adjusted basis for Oregon to be depreciated over the life of the asset. Most taxpayers with an addition for this disconnect in 2009 or 2010 will have future year subtractions over the remaining life of the asset (See exception below: Net Operating Losses.)

NOL and federal depreciation disconnect. Your Oregon NOL is the same as your federal NOL. Therefore if you have a NOL in 2009 or 2010 and also claimed depreciation or expensing not allowed by Oregon, your future year subtractions are reduced by the amount already included in the NOL.

Example 1: Paula expensed $144,000 in assets under IRC section 179 in 2010. Because Oregon only allowed expensing of $134,000, she had a $10,000 addition on her 2010 Oregon return. Due to deductions and losses related to her business, Paula had a $15,000 NOL for 2010. Normally, she would have an Oregon basis of $10,000 and could claim Oregon subtractions over the life of those assets. Because Paula’s federal NOL is the same for Oregon purposes, she has already received the benefit in the NOL deduction. When Paula carries the NOL forward or back she is not allowed any future year subtractions due to depreciation differences.

Example 2: Same as Example 1 except that Paula’s NOL was only $7,000. Paula still had an addition of $10,000 on her 2010 Oregon return. Paula would have been allowed to claim $10,000 in subtractions over the life of the assets bought in 2010 if she didn’t have a NOL. Because Paula had a NOL, the amount claimed in subtractions over the life of the assets bought in 2010 is reduced to $3,000 ($10,000 expensing difference minus $7,000 already allowed as a NOL deduction).
She will use a reasonable method to assign the $3,000 in Oregon adjusted basis to one or more of the assets purchased in 2010 to calculate her future years’ differences in depreciation.


Oregon Depreciation Schedule. Use the Oregon Depreciation Schedule to determine if your Oregon depreciation is the same as, or different from, your federal depreciation.

Oregon depreciation on all property

-

Federal depreciation on the same property

=

Oregon difference in depreciation


Oregon subtraction. If your Oregon depreciation is more than your federal depreciation on the same property, you'll have a subtraction (subtraction code 354) for the difference.

Oregon addition. If your Oregon depreciation is less than your federal depreciation on the same property, you'll have an addition (addition code 152) for the difference.

Go to our website to download the Oregon Depreciation Schedule, or call us to order it.

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Partnership and S corporation modifications for Oregon and Business tax credits from flow-through entity ORS 314.712 to 314.752

[Addition code 119] [Subtraction code 323] [Credit code 736]

If you received a Schedule K-1 from a flow-through entity (Partnership, S corporation, or LLC filing as
either), then you may have Oregon additions, subtractions, or credits that flow-through to your Oregon return. Your modification or credit is based on the total for the business multiplied by your ownership percentage, which should have been calculated by the business.

If there is a specific code for the Oregon modification or credit, use that code. Otherwise, use the above codes to identify the Oregon modification or credit.

Examples: If your LLC had a subtraction for a difference in depreciation, use the subtraction code 354, the specific code for that modification. If your S corporation qualified for a lenders credit for affordable housing, use credit code 736 because there is no specific code for that credit.

Nonresidents: If your business operates both in and out of Oregon, it has an apportionment percentage from Schedule AP, Apportionment of Income for Corporations and Partnerships. This percentage should be provided to you with your Schedule K-1, since it shows you how much of the income from your business is Oregon source. The business should have already multiplied your share of Oregon additions and subtractions by the apportionment percentage. Oregon credits that flow through may be required to be multiplied by your Oregon percentage on your Form 40N. See the instructions for the credit to see if this is required.

Part-year residents: Use the nonresident information for the part of the year you were a nonresident and the full amounts for the time you were a resident.

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Basis of business assets transferred into Oregon ORS 316.707

[Addition code 150] [Subtraction code 358]

Are you a nonresident? If so, there are several ways you can bring assets into Oregon’s taxing jurisdiction. For example:

  • You become an Oregon resident and transfer business assets into Oregon.
  • You become an Oregon resident and leave the assets in the other state.
  • You open a business in Oregon and transfer business assets into Oregon.

Did you transfer business assets into Oregon? If so, the basis for Oregon depreciation will be either the federal unadjusted basis or fair market value at the time of transfer, whichever is smaller.

The federal unadjusted basis is the original cost before adjustments. Adjustments include reductions
for investment tax credits, depletion, amortization, depreciation, or amounts expensed under IRC Section 179. The fair market value and useful life are figured when you bring the asset into Oregon.

Reduce the federal unadjusted basis or the fair market value of the asset by any Oregon depreciation previously allowed.

Example: Bob was a California resident. He has owned a business in Yreka since 1988. Bob bought an office building in Yreka for $800,000. He placed it in service March 1, 1988. For federal purposes, the building is 31½-year real property and is being depreciated using the applicable percentages. On January 1, 2010, Bob bought a truck for $45,000. For federal purposes, the truck is five-year property and is being depreciated using the applicable percentages.

On January 1, 2014, Bob moved to Ashland, but he continues to operate his business in Yreka. Because Bob is an Oregon resident, he must determine his Oregon basis to depreciate his assets for Oregon. The Oregon adjusted basis is computed as follows:

Building
Smaller of:
     Cost of building (federal unadjusted basis) $ 800,000
     Less: Depreciation previously allowed for Oregon tax purposes - 0
     Net basis $ 800,000
     or
     Fair market value as of January 1, 2014 $1,473,000
     Less: Depreciation previously allowed for Oregon tax purposes - 0
     Oregon fair market value $1,473,000


Bob will depreciate the building for Oregon using the $800,000 federal unadjusted basis and Modified Accelerated Cost Recovery System (MACRS) depreciation for its original federal applicable recovery period.

Truck
Smaller of:
     Cost of truck (federal unadjusted basis) $ 45,000
     Less: Depreciation previously allowed for Oregon tax purposes - 0
     Net basis $ 45,000
     or
     Fair market value as of January 1, 2014 $ 27,000
     Less: Depreciation previously allowed for Oregon tax purposes - 0
     Oregon fair market value $ 27,000


Bob will depreciate the truck for Oregon using the $27,000 Oregon fair market value and MACRS depreciation for its original applicable federal recovery period.


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Sale of assets ORS 316.716

[Addition code 154] [Subtraction code 355]

Gain or loss on property you began depreciating after 1980 and before 1985. During the tax year, did you sell property you began depreciating after December 31, 1980, and before January 1, 1985? If you did and didn’t make the one-time adjustment on your 1996 Oregon return, your gain or loss for Oregon may differ from your gain or loss for federal purposes. If you sold this property during the year, you must make an adjustment on your return to reconcile your Oregon basis to your federal basis.

To figure your gain or loss for Oregon, use the depreciation you claimed on your Oregon return in prior years. Subtract the total amount of gain or loss for Oregon property you began depreciating after 1980 and before 1985 from your gain or loss for federal purposes for the same property. The difference is an Oregon addition or subtraction. Keep a worksheet with your tax records to show how you figured the difference.

Addition or subtraction

If Oregon depreciation is less than your federal depreciation, you will have an Oregon subtraction. If
Oregon depreciation is more than your federal depreciation, you will have an Oregon addition.

Partnerships and S corporations

Partnerships report differences between federal and Oregon depreciation on the Oregon partnership
return. S corporations report the differences on Schedule SM of the Oregon S corporation return. The
differences must also be shown on the partner’s or shareholder’s Schedule K-1 or equivalent.

The differences will be added to or subtracted from income on the individual partner’s or shareholder’s Oregon income tax return.to Top


Gain on the sale of an Oregon residence ORS 316.048

[Addition code 152] [Subtraction code 354]

Generally, Oregon will tax the gain from the sale of your residence only when the federal government taxes it. Oregon will not tax any gain excluded on your federal return. This is true even if you reinvest in a home outside Oregon.

The Oregon basis of your home is generally the same as your federal basis. If you're taxed by the federal government, Oregon will tax you on the same amount of gain.

Exception: If you were renting out a house and then converted it to your personal residence, the Oregon basis may not be the same as the federal basis due to depreciation differences.

Note: If you are also taxed by another state or country on some or all of the gain, see the section on mutually taxed gain on the sale of residential property.

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Fiduciary adjustment ORS 316.697

[Addition code 133] [Subtraction code 310]

The same modifications that apply to an individual return also apply to an Oregon estate or trust return. Combined, this is called the fiduciary adjustment. If you're a beneficiary of an estate or trust, you must report your share of the fiduciary adjustment. This should be shown on the Schedule K-1 which you receive from the estate or trust. Report it under "other additions" (addition code 133) or "other subtractions" (subtraction code 310) on your Oregon tax return. 

Example: Frank reported $5,000 of trust income from R&C Farewell Trust on federal Schedule E. Of this, $2,500 was from interest on U.S. obligations, which is not taxable by Oregon. He also received interest income of $1,000 from the trust that was not included in his federal income. This interest was from California bonds and is taxable by Oregon. Frank should claim a $1,500 "other subtraction" on his Oregon return, the net of both fiduciary adjustment items, using subtraction code 310.

Part-year residents. Oregon taxes the fiduciary adjustment if it relates to Oregon income or if you were an Oregon resident on the last day of the trust's taxable year.

Nonresidents. Oregon taxes the fiduciary adjustment if it relates to Oregon income.

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Passive activity losses (PALs) ORS 314.300

[Addition code 155] [Subtraction code 356]

Generally, a passive activity is any:
  • Rental activity including equipment and real estate, regardless of your level of participation, or
  • Business in which you do not materially participate in a regular, continuous, and substantial basis.
Oregon generally adopted the federal passive loss rules in the federal Tax Reform Act of 1986 and the Revenue Reconciliation Act of 1993. There are some differences in passive losses for Oregon.
How to compute and report passive losses for Oregon
  1. Modify the federal passive loss by the applicable additions and/or subtractions listed under “Oregon modifications to federal passive activity losses,” below.
  2. Apply the federal passive loss limitations to the Oregon passive loss you computed in step 1 above. This will determine how much is deductible for Oregon. To apply the income limitations, use federal AGI before modifying for additions or subtractions.
  3. Figure the difference between the passive loss reported on your federal return and the deductible Oregon loss you figured above. You will claim an addition or subtraction on your Oregon return. 
  4. Keep a schedule with your tax records showing your computations for steps 1, 2, and 3 above.
  5. Also keep a schedule (when applicable) showing the allocation of Oregon modifications between the Oregon passive loss activities and other business activities.
Example: Depreciation modification. Elijah has determined that his depreciation for Oregon is more than his federal depreciation by $1,000. Ordinarily, he would report a $1,000 subtraction on his Oregon return for the difference in depreciation.

Of the $1,000 difference in depreciation, $600 is allocable to passive activities and $400 is allocable to other business activities. His Oregon passive activity loss is his federal passive activity loss increased by the $600 difference in depreciation. He reports the remaining $400 difference in depreciation allocable to other business activities as a subtraction on his Oregon return.

Passive activity credits. You can offset in full the tax
credits related to a passive activity against your Oregon tax liability for the taxable year.

Active participants in rental real estate activities. The
$25,000 offset for rental real estate activities provided in IRC 469(i) applies to deductions allowed under federal and Oregon law. You will not reduce the offset by deduction equivalents defined in IRC 469(j)(5). The phaseout amounts ($100,000/$150,000) are based on federal adjusted gross income regardless of whether you are a full-year resident, part-year resident, or nonresident of Oregon.

Part-year residents. Compute your passive activity
losses from activities carried on while an Oregon resident. Add those connected with Oregon sources while a nonresident. Modify the result by applicable additions and/or subtractions listed below.

Nonresidents. Compute your passive activity losses
from activities connected with Oregon sources. Modify the loss by the applicable additions and/or subtractions listed below. The loss must be connected with Oregon sources even if you later become an Oregon resident.

Oregon modifications to federal passive
activity losses
Following are some of the modifications you must
make for Oregon:

   1. Additions:

  • Interest or dividends on obligations of another state.
  • Depletion in excess of the adjusted basis of property.
  • Gain on voluntary or involuntary conversions or exchanges of Oregon property reinvested outside Oregon when no election is made to defer it.
    2. Subtractions:
  • Gain or loss on the sale of public utility stock where dividends were reinvested.
  • Interest or dividends on obligations of the U.S. government.
  • Wages you did not deduct in federal taxable income because you claimed the federal work opportunity credit.
  • Interest or dividends on obligations of Oregon political subdivisions.
    3. Additions or subtractions
  • Differences in depreciation.
  • Differences in gain or loss from basis differences in the sale of an asset.

Note:
Items used to modify the federal passive activity
loss must occur in the ordinary course of a trade or business.


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Individual Development Accounts

[Addition code 137 - Non-qualified withdrawal] [Addition 138 - Add back for donation credit] [Donation Credit code 715] [Subtraction code 314] [Withdrawal Credit code 738]

Subtraction ORS 316.848

An Individual Development Account (IDA) allows you, as an individual in a lower income household, to accumulate assets tax-free. As the account holder, you will make deposits to your own account. Your deposits will be matched with private donations.

Withdrawal of funds for a qualified purpose is tax free. Qualified purposes include:

  • Paying higher education expenses, or 
  • Purchasing a primary residence, or 
  • Starting your own business.

Oregon allows a subtraction on your tax return for deposits to your IDA through the Neighborhood Partnership Fund. Your subtraction includes the IDA interest received if the interest is included in your federal taxable income. For more information, call The Neighborhood Partnership Fund at (503) 226-3001 or go to their website at www.neighborhoodpartnerships.org.

Addition
Did you make a nonqualified withdrawal from your IDA during the year? If so, you must report the amount as an “other addition” (addition code 137) on your Oregon income tax return.

Withdrawal Credit ORS 315.272

A tax credit is available to IDA account holders for withdrawals from an IDA. The withdrawal must be used for settlement, financing or other closing costs incurred in purchasing a primary residence. This credit is in addition to the subtraction for contributions to the IDA.

The credit is the least of:

  • The amount withdrawn from the IDA,
  • The qualifying closing costs to purchase a primary residence,
  • The taxpayer's tax liability for the year, or
  • $2,000.

There is no carryforward and the credit is not prorated for part year residents or nonresidents.


Donation Credit ORS 315.271

Oregon allows a tax credit for charitable contributions to the Neighborhood Partnership Fund for the Oregon IDA program during the tax year. Individuals, partners, S corporation shareholders, and corporations can claim the credit. Part-year residents and nonresidents are not required to prorate the credit. 

The credit is the smaller of $75,000 or 75 percent of the donation made. It cannot be more than your Oregon tax liability. You can carryforward any unused credit for the next three years. If you do not use the unused credit within three years, it is lost.

You may not claim both the tax credit and a charitable deduction or business deduction for the same contribution. If you claim the credit you will have an addition on your Oregon return for the amount deducted. Use addition code 138 to add back the amount claimed as both a credit and deduction. 


Part-year residents and Nonresidents. For instructions on how to claim your addition as an "other deduction and modification," see the section on deductions and modifications.

For information on how to make a donation, contact The Neighborhood Partnership Fund at (503) 226-3001 or go to their website at www.neighborhoodpartnerships.org.

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Oregon percentage ORS 316.117

Part-year residents and nonresidents must compute an Oregon percentage. This determines allowable deductions and modifications and Oregon tax. 

Divide your income after subtractions from the Oregon column by your income after subtractions from the federal column. Enter the figure on the Oregon percentage line. Do not fill in more than 100 percent or less than -0-.

Example 1: Lisa reported $30,000 of income after subtractions in the federal column. She reported $10,000 of income after subtractions in the Oregon column.
Here’s how she figured her Oregon percentage:

$10,000 ÷ $30,000 = .333 or 33.3%


Carry the decimal to three places to figure your Oregon percentage.

If the federal column is negative and the Oregon column is positive, your Oregon percentage is 100%.

If the federal column is positive and the Oregon column is negative, your Oregon percentage is 0%.

Example 2:

Federal
column

Oregon
column

Oregon
percentage

($20,000)

$42,000

100%

$50,000

($22,000)

0%

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Deductions and modifications ORS 316.695

You may claim either net itemized deductions or Oregon’s standard deduction, whichever is larger, but not both. 

Itemized DeductionsGenerally, you may claim your total itemized deductions shown on federal Schedule A, line 29. But there is an exception. If you itemize for Oregon only, fill out a separate Schedule A. You may claim itemized deductions for Oregon even if you could not on your federal return. You still use federal adjusted gross income to figure the Schedule A limitations. Keep the Oregon schedule with your tax records.

Note: If you are married/RDP filing separately, you must itemize deductions if your spouse/RDP itemizes. Are you filing separate returns for Oregon only? If so, determine your share of itemized deductions by multiplying your total joint deductions by the percentage you figured for separate returns. See Special instructions for married/RDP filers with different residency statuses. Remember to use your Oregon itemized deductions after subtracting state tax. You may separate your deductions if each of you can clearly show your own.
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Limit on itemized deductions

Did you reduce itemized deductions on your federal return because your federal adjusted gross income (AGI) exceeded the threshold? If so, complete the following worksheet to determine the correct amount of Oregon income tax to subtract from itemized deductions.

itemized-worksheet1.png

Example 1: Adam, a single taxpayer aged 43, filed a return with itemized deductions and $300,000 of AGI. His itemized deductions are as follows, taken from his federal itemized deductions worksheet.
Federal itemized deductions worksheet:
2013 federal itemized deduction example 1
Adam’s itemized deductions total $94,500, of which $82,500 is subject to the federal limit, and $12,000 is not subject.

Here is an example of how Adam calculates his Oregon itemized deductions:
2014 itemized deduction worksheet example 1
For Oregon, Adam will reduce his $93,126 of federal itemized deductions (81,126 + 12,000) by $45,218 of Oregon income tax not allowed as an itemized deduction. His net Oregon itemized deductions total $47,908.

Did you claim an Oregon credit for contributions to
the Child Care Fund, Oregon Cultural Trust, Oregon Production Investment Fund, Renewable Energy Development Fund, University Venture Development Fund, or Alternative Fuel Vehicle Fund, and also claim your contribution as a federal deduction on Schedule A? Were your itemized deductions limited because your adjusted gross income (AGI) exceeded the federal threshold amount? If so, you can use the itemized deduction limit worksheet above to calculate your addition.

Example 2: Use the same facts as in Example 1 above, except Adam’s charitable contributions contained $5,000 that was also claimed as a credit for tax credits purchased from the Alternative Fuel Vehicle Fund auction. Adam will use the percentage calculated on line 7 of the worksheet to determine his addition for Oregon, calculated as follows:

Total contributions not allowed for Oregon purposes.    $5,000
Percentage of contributions allowed on federal Schedule A (line 7).        .983
Oregon addition (5,000 x .983).    $4,915
                                                                      
Of the $5,000 contribution Adam made, only $4,915 was allowed on his federal Schedule A due to the AGI limitation. Adam’s Oregon addition will be for $4,915, the amount allowed on Schedule A, not the full donation of $5,000.

Net Oregon itemized deductions Your net Oregon itemized deductions are your:
  • Total federal itemized deductions, less
  • Oregon state income tax claimed as an itemized deduction.
In most cases, you’ll use net Oregon itemized deductions if that amount is larger than your Oregon standard deduction. The exception to this is for married/RDP filing separately, explained earlier.

Part-year residents and
NonresidentsUse the following other deduction and modification codes:
  • Child Care Fund contribution — code 642
  • Claim of right income repayment — code 649
  • Oregon Cultural Trust contribution — code 643
  • Oregon Production Investment Fund contribution — code 644
  • Renewable Energy Development Fund contribution — code 645
  • University Venture Development Fund contribution — code 646
  • Long-term Care Insurance Premiums — code 647
  • Neighborhood Partnership Fund contribution (Individual Development Accounts donation credit) — code 648
  • Alternative Fuel Vehicle Fund contribution — code 641
Did you itemize deductions and claim one or more of the following Oregon credits: Child Care Fund contribution, Claim of right income repayment, Oregon Cultural Trust contribution, Oregon Production Investment Fund contribution, Renewable Energy Development Fund contribution, University Venture Development Fund contribution, Long-term Care Insurance Premiums, Neighborhood Partnership Fund contribution (Individual Development Accounts donation credit), or the Alternative Fuel Vehicle Fund contribution? If so, you may have a modification; see the instructions for the credit(s) you claimed in the “additions” section of this publication for the amount of your modification.
You will claim the required addition as a negative “other deduction and modification” on your Oregon Form 40N or 40P. Clearly write a minus sign in front of the corresponding amount for this addition on line 46 of your return or Schedule OR-ASC-N/P.

Standard deduction

Use the standard deduction only if it is larger than your net itemized deductions. If you're married/RDP filing separately and your spouse itemizes, your standard deduction is -0-.

Generally, your standard deduction is based on your filing status:

Single $2,115
Married/RDP filing jointly $4,230
Married/RDP filing separately:
     If spouse/RDP claims standard deduction $2,115
     If spouse/RDP claims itemized deductions -0-
Head of household $3,405
Qualifying widow(er) $4,230


Standard deduction - Age 65 or older, blind. Did you check one or more of the boxes on line 7a because you or your spouse/RDP are age 65 or older or because you or your spouse/RDP are blind? Then you're entitled to an additional deduction amount.

If you checked one or more of the boxes on line 7a, multiply the number of boxes checked by:

  • $1,000 if married or qualifying widow(er)
  • $1,200 if single or head of household

Add this amount to the standard deduction amount for your filing status from above. Fill in the total on line 26.

Example 1: Matt and Sandy are married and file a joint return. They checked two of the boxes on line 7a because Matt is over 65 (not blind) and Sandy is blind (age 62). Their total standard deduction is $6,230. They figure their standard deduction as follows:

$4,230--Standard deduction for their filing status MFJ

$2,000--2 x $1,000

$6,230--Total standard deduction


Standard deduction - Single or married/RDP filing jointly dependents. If you or you and your spouse/RDP can be claimed as a dependent on another person's return (even if the other person does not claim you), use the following worksheets to figure your standard deduction:


1. Enter your earned income (see definition below). 1.                
2. Additional, set amount. 2. $300
3. Add lines 1 and 2. 3.                
4. Minimum standard deduction, set amount. 4. $1,000
5. Enter the larger of line 3 or 4. 5.                
6. Basic standard deduction for single. 6. $2,115
7. Enter the smaller of line 5 or 6. 7.                
8. If you are age 65 or older, enter $1,200, if not enter -0-. 8.                
9. If you are blind, enter 1,200, if you are not, enter -0-. 9.                
10. Add lines 7, 8, and 9. Enter the total here. This is your standard deduction. 10.                

Earned income is salaries, wages, tips, professional fees, or other amounts received as pay for work you actually perform, and any part of a scholarship or fellowship grant that you must include in your gross income.


Example 1: Homer is single, age 17, not blind, and claimed as a dependent by his father. He had $1,135 of earned income. Homer's standard deduction is $1,485, figured as follows:
​1. Enter your earned income. ​1. $1,135
​2. Additional, set amount. ​2. $350
​3. Add lines 1 and 2. ​3. $1,485
​4. Minimum standard deduction, set amount. ​4. $1,000
​5. Enter the larger of line 3 or 4. ​5. $1,485
​6. Basic standard deduction for single. ​6. $2,115
​7. Enter the smaller of line 5 or 6. ​7. $1,485
​8. If you are age 65 or older, enter $1,200, if not enter -0-. ​8. -0-
​9. If you are blind, enter 1,200, if you are not, enter -0-. ​9. -0-
​10. Add lines 7, 8, and 9. Enter the total here. This is your standard deduction. ​10. $1,485


Standard deduction worksheet for married/RDP filing jointly dependents (FJD)

​1. Enter your earned income. ​1. ​               
​2. Additional, set amount. ​2. $350
​3. Add lines 1 and 2. ​3.                ​
​4. Minimum standard deduction, set amount. ​4. $1,000
​5. Enter the larger of line 3 or 4. ​5. ​               
​6. Standard deduction for FJD. ​6. $4,230
​7. Enter the smaller of line 5 or 6. ​7. ​               
​8. If you are age 65 or older, enter $1,000, if not enter -0-. ​8.                ​
​9. If you are blind, enter 1,000, if you are not, enter -0-. ​9. ​               
​10. Add lines 7, 8, and 9. Enter the total here. This is your standard deduction. ​10. ​               


Earned income is salaries, wages, tips, professional fees, or other amounts received as pay for work you actually perform, and any part of a scholarship or fellowship grant that you must include in your gross income.


Example 2: Jack and Jill are married and are both full-time college students. Jack is 20 and Jill is 21. Neither is blind. They live in Jack's parent's home and are both claimed as dependents by Jack's parents. Jack and Jill work part-time at the university. Together they had $7,620 of wage income. Jack and Jill will file a joint tax return. They calculate their standard deduction as follows:

1. Enter your earned income. 1. $7,620
2. Additional, set amount. 2. $350
3. Add lines 1 and 2. 3. $7,970
4. Minimum standard deduction, set amount. 4. $1,000
5. Enter the larger of line 3 or 4. 5. $7,970
6. Basic standard deduction for FJD. 6. $4,230
7. Enter the smaller of line 5 or 6. 7. $4,230
8. If you are age 65 or older, enter $1,000, if not enter -0-. 8. -0-
9. If you are blind, enter 1,000, if you are not, enter -0-. 9. -0-
​10. ​Add lines 7, 8, and 9. Enter the total here. This is your standard deduction. ​10. $4,230​

Standard deduction - Nonresident aliens. The standard deduction for nonresident aliens is -0-.

Standard deduction - Short-period return. Individuals filing a short-period return may not claim a standard deduction.

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Oregon tax ORS 316.037

Tax. To figure the tax on your Oregon taxable income, refer to the tax booklet for the correct tax tables or tax charts. These are also available on our website at www.oregon.gov/dor.

Interest on certain installment sales (ORS 314.302). Do you have installment sales that you had to pay interest on the deferred tax liability for federal purposes? If so, you must also pay interest for Oregon. The amount due is computed the same way as for federal. The interest rate for 2014 is 5 percent.

Part-year residents. For the part of the year you were a nonresident, include only those installment obligations that were from dispositions of property in this state.

For the part of the year you were a resident, consider all installment obligations.

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Farm liquidation long-term capital gain tax rate ORS 316.045

A reduced tax rate is available if you sold or exchanged capital assets used in farming activities. The sale or exchange must represent a termination of all your ownership interests in a farming business, or a termination of all your ownership interests in property that is used in a farming business.
Farming activities include:

  • Raising, harvesting, and selling crops.
  • Feeding, breeding, managing, or selling livestock, poultry, fur-bearing animals, or honeybees or the product thereof.
  • Dairying and selling dairy products.
  • Stabling or training horses, including providing riding lessons, training clinics, and schooling shows.
  • Propagating, cultivating, maintaining, or harvesting aquatic species, birds, and other animal species.
  • Growing and harvesting cultured Christmas trees or certain hardwood timber.
  • On-site construction and maintenance of equipment and facilities used in farming activities.
  • Preparing, storing, or disposing of products or byproducts raised for human or animal use on land employed in farming activities.
Farming activities do not include growing and harvesting trees of a marketable species, other than growing and harvesting cultured Christmas trees or certain hardwood timber.

You may not claim the special tax rate on a sale or
exchange to a relative, as defined by Internal Revenue Code Section 267. A farm dwelling or farm home site is not considered to be property used in the trade or business of farming.

Partnerships or S corporations. The sale of ownership
interests in a farming corporation, partnership, or other entity qualifies for the special tax rate. The taxpayer must have had at least a 10 percent ownership interest in the entity before the sale or exchange.

How to compute the tax. If you qualify, follow the steps in the worksheet below to figure the tax on your farm assets’ net long-term capital gain (NLTCG).

If you have a net loss from the sale or exchange of
all assets during the year, STOP HERE. You do not qualify for the reduced rate on the sale of farm assets.

The NLTCG eligible for the special tax rate is computed
as follows:
​a. Enter your NLTCG from farm assets. a.​ ​               
​b. Enter your capital gain included in Oregon income. ​b.                ​
​c. Enter the smaller of line a or line b here and on line 2 below. ​c.                ​


Worksheet FCG, Farm Capital Gain

​1. Enter your Oregon taxable income. ​1.                ​
​2. Enter your farm assets' NLTCG from line c above. ​2.                ​​
​3. Modified taxable income. Line 1 minus line 2, but not less than -0-. ​3.                ​
​4. ​Enter the Oregon tax on amount from line 3 above. Use the appropriate tables or tax rate charts found in the instruction booklet. ​4.                ​​
​5. Enter the smaller of line 1 or 2 above. ​5.                ​​
​6. Multiply line 5 by 5% (.05). ​6.                ​​
​7. Add lines 4 and 6. This is your Oregon tax. If you file Form 40P, go to line 8 below. ​7.                ​​
​8. Form 40P filers, compute your Oregon income tax by multiplying line 7 above by your Oregon percentage. This is your Oregon tax. ​8.                ​​


Check the box labeled "Worksheet FCG" on your Oregon tax return.

Example: In June 2014 Al retired and sold all of his dairy farm capital assets. Below is the completed worksheet for Al:

​a. NLTCG from farm assets. ​a. $180,000
​b. His capital gain included in Oregon income. ​b. $152,000
​c. Enter the smaller of line a or line b here and on line 2 below. ​c. $152,000

Worksheet FCG, Farm Capital Gain
​1. Oregon taxable income. 1.​ $60,000
​2. Farm assets' NLTCG from line c above. ​2. $152,000
​3. Modified taxable income. Line 1 minus line 2, but not less than zero. ​3. -0-
​4. Oregon tax on amount from line 3. Use tax tables or charts. ​4. -0-
​5. Enter the smaller of line 1 or line 2. ​5. $60,000
​6. Line 5 x 5% (.05). ​6. $3,000
​7. Line 4 plus line 6. This is Al's Oregon tax. ​7. $3,000
 

Al enters the $3,000 capital gain tax on his Form 40. He will check the "Worksheet FCG" box to show that his tax is based on farm capital gain.

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Farm income averaging ORS 314.297

You can figure your Oregon income tax by averaging, over the previous three (base) years, all or part of your 2014 farm income. This may give you a lower tax if your 2014 farm income is higher than your taxable income for one or more of the three prior years.

Elected farm income

A farming business is the trade or business of cultivating land or raising or harvesting any agricultural or horticultural commodity. Your elected farm income is the amount of your taxable income from farming that you elect to include on Form FIA-40, FIA-40P, or FIA-40N. You do not have to include all of your taxable income from farming. It may be to your advantage to include less than the full amount. It depends on how the amount affects your tax bracket for the current and three prior tax years.

To download the following forms and instructions, go to our website or call us to order the forms.

  • Form FIA-40, Oregon Farm Income Averaging, if you are a full-year resident.
  • Form FIA-40N/P, Oregon Farm Income Averaging, if you are a nonresident or part-year resident.
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