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OREGON TAX PREPARATION 2013

OREGON TAX PREPARATION 2013. TOPICS TO BE COVERED TODAY. Who Must File Resident Returns Part-Year and Non-Year Resident Returns Anatomy of the Oregon Income Tax Return Modifications to the Federal Tax Return Oregon Credits: Nonrefundable and Refundable

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OREGON TAX PREPARATION 2013

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  1. OREGON TAX PREPARATION2013

  2. TOPICS TO BE COVERED TODAY • Who Must File • Resident Returns • Part-Year and Non-Year Resident Returns • Anatomy of the Oregon Income Tax Return • Modifications to the Federal Tax Return • Oregon Credits: Nonrefundable and Refundable • What is new for 2013 • Special Medical Subtraction • Working Family Credit • Registered Domestic Partners • Elderly Rental Assistance • Other notes and Tidbits

  3. WHO MUST FILE

  4. FULL-TIME RESIDENT RETURN Taxpayer resided in Oregon the entire year, even if taxpayer lived outside Oregon Taxpayer thinks of Oregon as their permanent residence Oregon is the center of financial, social and family life Taxpayer intends to return to Oregon Income earned in Oregon and other states while an Oregon resident is taxable by Oregon Eligible for all Oregon Credits Use Oregon Form 40

  5. PART-YEAR RESIDENT RETURN • Taxpayer moved into or out of Oregon during the tax year • Income earned in Oregon or while an Oregon resident is taxable in Oregon • Not subjected to tax: Income earned outside Oregon while resident of another state • Source Income example • Taxpayer moved to Oregon Oct. 1st • Income earned in another state prior to that date is not taxed by Oregon • Income earned after that date is taxed by Oregon • Use Oregon Form 40P

  6. NON-RESIDENT RETURN • Taxpayer lives out-of-state, but has Oregon Income • Taxpayer may file a married filing separately return for Oregon only • Source example • Taxpayer lives in Washington, but works in Oregon • All income earned in Oregon is taxed by Oregon • All income earned outside of Oregon is not taxed by Oregon • Use Oregon Form 40N

  7. FEDERAL 1040 VS. OREGON 40 Federal Income Tax Return Oregon Income Tax Return • Income subject to tax • Adjustments • = Adjusted Gross Income (AGI) • Deduction (Std./Itemized) • Personal Exemption • = Taxable Income (apply tax rate) • = Tax Liability • Credits & taxes withheld • = Refund/Taxes Due • Federal AGI • + Additions • Subtractions • Deduction (Std./Itemized) • = Taxable Income (apply tax rate) • = Tax Liability • Personal Exemption • Credits & taxes withheld • = Refund/Taxes Due

  8. OREGON TAX RETURN • Based on Federal Adjusted Gross Income (AGI) • Federal Form 1040, Line 37 • Additions – Income subject to Oregon tax, but not Federal tax • Subtractions – Income subject to Federal tax, but not Oregon tax • Deductions – Standard or itemized • Lower standard deduction than Federal • Itemizing may exceed Oregon standard deduction • Tax calculated

  9. ADDITIONS TO FEDERAL AGI • Interest on tax exempt state/local bonds outside Oregon • Entry made on TaxWise Interest Statement • Other Additions include: • Oregon Cultural Trust contributions if taken as an itemized deduction and an Oregon tax credit is taken (Code 104) • Long term care insurance if a tax credit is taken (Code 104) • Gambling losses claimed as an itemized deduction to the extent that they are claimed against Oregon lottery winnings subtractions(Code 105) • Other additions: See Oregon Form 40 Instructions

  10. SUBTRACTIONS FROM FEDERAL AGI • Federal tax liability (Maximum allowed $ 6,250) • Social Security and Railroad Retirement Benefits • Oregon Income Tax refund included in Federal Income • Interest/Dividends from U. S. Government sources, e.g. savings bonds • Federal Pensions • October 1, 1991 is the “Magic Date” • Check Box 2 on the Federal Form 1099R • Other subtractions include: • 529 Oregon College Saving Plan (Code 324) • Military Active Duty Pay (Code 319) • Oregon Lottery Winnings up to $ 600.00 per ticket(Code 322) • Federal Education Credit (Code 308) • Special Oregon Medical (Code 351) de 351)

  11. DEDUCTIONS • Standard Deduction • Itemized deductions from Federal Schedule A, Line 29 • TaxWise will automatically select the best option • It may be advantageous to itemize in Oregon and take standard deduction for Federal

  12. OREGON NONREFUNDABLE CREDITS • Exemption Credit ($ 188) • Retirement Income Credit • Child & Dependent Care Credit • Elderly or Disabled Credit • Political Contributions Credit ($ 50/$ 100) • Income tax paid to another state Credit • Others: • Long-term Care Insurance Premiums (Code 716) • Oregon Cultural Trust (Code 722) • Residential Energy (Code 729) • Oregon Political Contribution (Code 723)

  13. OREGON REFUNDABLE CREDITS • Earned Income Credit (6% of Federal EIC) • Working Family Child Care Credit • Mobile Home Park Closure Credit (Use Oregon Schedule MPC) e MPC

  14. What is New for 2013 Defense of Marriage Act (DOMA) For tax purposes Oregon will recognize same-sex marriages performed in other jurisdictions, both other states and foreign countries A same-sex couple must file married filing jointly or separately for both Federal and Oregon purposes Amended returns will be accepted if married in a prior year Special Oregon Medical Subraction Converted from deduction to subtraction for 2013 Must be 62 or older to subtract medical expense Subtractions are limited based on AGI

  15. Oregon Medical Subtraction • Oregon taxpayers age 62 and older may claim a subtraction for unreimbursed qualified medical expenses. • Does not apply to spouses under age 62 or dependents of any age. • Expenses must be attributed to the correct taxpayer. Joint expenses can be split in any “reasonable” way. • The subtraction is capped based on income. • Expenses for which the taxpayer gets a schedule A benefit are not included.

  16. Oregon Medical Subtraction Limits

  17. Oregon Medical Subtraction Worksheet

  18. Example 1 • Margaret is age 67 on Dec 31. 2013. • She has a dependent 9 year old grandchild who lives with her and she files Head of Household. • Margaret’s AGI is $27,000. • Margaret does not itemize deductions. • Margaret paid $1,200 medical expenses for herself and $1,600 medical expenses for her grandchild. • What is Margaret’s special Oregon medical subtraction?

  19. Margaret’s Medical Subtraction Worksheet

  20. Example 2 • George and Elizabeth are both age 68 on 12/31/13 and are filling a joint return. • They had a federal AGI of $47,000. • They are itemizing deductions • They had $8,900 of medical and dental expenses of which $2,200 were for George and $6,700 were for Elizabeth. • What is their special Oregon Medical subtraction?

  21. Kenneth and Sophia Oregon Medical Subtraction

  22. Example 3 • Lily and Al are ages 62 and 59 on 12/31/13. • They are filing a joint return. • Their AGI is $43,000. • During 2013 they paid $4,700 in medical and dental expenses claimed on Schedule A, line 1 • Of their qualified medical expenses $1,600 are Lily’s expenses, $2,000 are Al’s expenses, and $1,100 is for a medical insurance policy covering both of them. • What is their special Oregon medical subtraction?

  23. Oregon Medical Subtraction Worksheet

  24. Special Oregon Medical Subtraction • The Good News • Taxwise will do most of the computations for you • The Bad News • You have to allocate the expenses between spouses • Only taxpayers age 62 and older are eligible • More Good News • You can prorate insurance any way that seems reasonable

  25. WORKING FAMILY CREDIT • Both parents must work • One parent can be a Full-Time Student • One parent can be disabled • Must have at least $ 8,400 earned income from Oregon Sources • Must have less than $ 3,300 investment income • Paid qualifying child care expenses • Qualifying child = child, niece, nephew, sibling, foster and adopted child if they meet the requirements • Credit is subject to audit by Oregon

  26. REGISTERED DOMESTIC PARTNERS (RDP) • Must be an “Oregon” RDP • RDP may file either RDP joint or RDP separate, may not file Single • RDP income is based as if they a filed Married Filing Jointly Federal Tax Return • Federal law prohibits same sex couples not legally married from filing a Married Filing Jointly return • Must prepare individual Federal Return for each taxpayer

  27. ELDERLY RENTAL ASSISTANCE (ERA) • Available to renters whose household income is less than $ 10,000 • Includes Social Security Benefits as income • Rental Owner must pay property tax • 20% or more of income must pay for rent and utilities (Gas, electricity and water. Not telephone or TV) • If under 65, must list value of household assets which must be less than $ 25,000 • User Oregon Form 90R • Cannot be e-filed • Must file by July 1, 2014

  28. OTHER NOTES AND TIDBITS • Married couple may file MFS if one spouse lives in Oregon and the other spouse lives in a different state • Injured Spouse/RDP Claims allowed • Amended returns allowed for the three prior years • Oregon Amended returns can not be e-filed • Charitable Check-off Donations • Political Party Contributions

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