Oklahoma State Tax Help

What is the recapture of depletion or addback of excess federal depletion?

Upon the expiration of the lease, depletion claimed must be restored to income in the case of non-producing properties. Enter depletion claimed on a lease bonus if no income was received from the property due to its lease expiration.

If the 22% Oklahoma option for computing depletion was used in a previous year and the 65% Federal depletion limitation applied in that year, you must add back any unused Federal depletion being carried over from such year and used in the current year's Federal return. Applicable recapture is determined on a well-by-well basis.

Enclose a complete schedule by property.

If you are e-filing your return, you should maintain this documentation in your records for three years in case the Oklahoma Tax Commission requests it. If you are mailing your return, include a copy of the documentation with your return.

What is the recapture of contributions to Oklahoma 529 College Savings Plans and OklahomaDream 529 Accounts?

If an individual elects to take a rollover on a contribution within one year of the date of the contribution, for which a deduction was taken on the previous year's return, the amount of such rollover is included in income and should be entered here. As used in this paragraph, "rollover" means the transfer of funds from the Oklahoma 529 College Savings Plan or OklahomaDream 529 accounts to any other plan under Section 529 of the Internal Revenue Code.

Also, for someone who makes a nonqualified withdrawal of contributions for which a deduction was taken in tax year 2005 or later, that withdrawal and any earnings thereon are included in income and should be entered here. If any of the earnings have already been included in your federal adjusted gross income, do not include them again here.

What out-of-state losses qualify as additions to income?

If you incurred losses from the operation of an out-of-state business, or from the rental or sale of out-of-state property, any such losses must be added back to Federal Adjusted Gross Income. This includes partnership losses and losses sustained by Subchapter S Corporations attributable to other states.

What are examples of other additions?

NOTE: If you are including an addition that requires further documentation be sure to include a copy with your return if you are mailing the return. If you are e-filing, any supporting documentation should be retained with your records for three years in case the Oklahoma Tax Commission requests it.

Other additions include the following:
  • Losses from the sales of exempt government obligations. The capital gain/loss from the sale of a U.S. Government Obligation is exempt from Oklahoma state taxes. Enclose Federal Schedule D.
  • If you are a swine or poultry producer who has deducted depreciation on an accelerated basis on your Oklahoma tax return in previous tax years, the asset may be fully depreciated for Oklahoma purposes. Any depreciation deducted on this year's Federal return, after the date the asset has been fully depreciated on your Oklahoma return, must be added back to avoid a duplication of depreciation. Enclose a copy of the Federal depreciation schedule showing the depreciation taken on the asset.
  • If a qualified Oklahoma refinery, of which you are a partner or shareholder, elected to expense the cost of qualified refinery property, such property is fully depreciated for Oklahoma purposes. For Oklahoma purposes no depreciation expense can be taken for this tax year on such property. Enter your pro-rata share of such depreciation. Include the partnership's or S corporation's name and ID Number in the description.
  • If you are a member of a pass-through entity that was:
    • required to add-back rents and interest expenses paid to a captive real estate investment trust when determining Oklahoma distributable income.
    • a captive real estate trust that was required to addback the dividends-paid deduction when determining Oklahoma distributable income.
    • Enter your pro-rata share of such add-back. Include your pass-through entity's name and ID number in the description
  • Any other income that was not included on your federal return because it was not taxable on a federal level, but is taxable by the State of Oklahoma.

What is Oklahoma depletion?

Oklahoma depletion on oil and gas well production, at the option of the taxpayer, may be computed at 22% of gross income derived from each Oklahoma property during the taxable year.

Any depletion deduction allowable is the amount so computed minus federal depletion claimed. If Oklahoma options are exercised, the federal depletion not used due to the 65% limit may not be carried over.

A complete detailed schedule by property must be furnished. If you're mailing your return, be sure to include the schedule with your return. If you're e-filing your return, retain the schedule in your records for three years in case the Oklahoma Tax Commission requests it.

Lease bonus received is considered income subject to depletion.

Major oil companies, as defined in 52 OS Sec. 288.2, when computing Oklahoma depletion are limited to 50% of the net income (computed without the allowance for depletion) from each property.

What other subtractions might I qualify for?

NOTE: If you're claiming a subtraction that requires further documentation be sure to include it with your return if you're mailing the return. If you're e-filing, any supporting documentation should be retained with your records in case the Oklahoma Tax Commission asks for it.
  • Inventor Royalty Income: Income earned by an inventor from a product developed and manufactured in Oklahoma is exempt from income tax for a period of seven years from January 1 of the first year in which such royalty is received as long as the manufacturer remains in Oklahoma. To support your deduction please furnish the following:
    1. A copy of the patent
    2. A copy of the royalty agreement with the manufacturer
    3. A copy of the registration form from OCAST.
  • Manufacturer Exclusion: An instate manufacturer of a product developed in Oklahoma by an inventor may exclude 65% of the cost of depreciable property (i.e. machinery, fixtures, equipment, buildings, or substantial improvements to buildings) purchased and used directly in manufacturing the product. The maximum exclusion you can claim is $500,000. Any amount that you can't claim in the year you purchased the property may be carried forward for four years.
  • Small Business Incubator Exclusion: Income earned by the sponsor from rental fees, service fees or any other form of payment for services provided to a tenant as an operator or an incubator, or for providing funding for such a facility, is exempt from state income tax for ten years from the date of the tenant's occupancy in an incubator. Income earned by the tenant as a result of activities conducted as an occupant in an incubator, including income distributed to partners or shareholders, is exempt from state income tax for ten years from the date of the tenant's occupancy.
  • Military Member Pay Exclusion: Any payment made by the United States Department of Defense as a result of the death of a member of the Armed Forces who has been killed in action in a designated combat zone is exempt from Oklahoma income tax during the taxable year in which the individual is declared deceased by the Armed Forces.
  • Military Spouse Pay Exclusion: Any income earned by the spouse of a member of the Armed Forces of the United States who has been killed in action in a designated combat zone is exempt from Oklahoma income tax during the taxable year in which the individual is declared deceased by the Armed Forces.
  • Other Subtractions: Enter any other allowable Oklahoma deductions from federal adjusted gross income. Specify the type of subtraction and Oklahoma Statute authorizing the subtraction. Enclose a detailed explanation and verifying documents.

What is the military pay exclusion?

Oklahoma residents who are members of any component of the Armed Services may exclude 100% of their active military pay received during 2014 that was included in their adjusted gross income. This includes Reserve and National Guard pay.

This exclusion does not apply to military retirement pay.

What are qualified adoption expenses?

An Oklahoma resident may deduct nonrecurring adoption expenses not to exceed $20,000 per calendar year. Expenses are to be deducted in the year incurred. "Nonrecurring adoption expenses" means adoption fees, court costs, medical expenses, attorney fees, and expenses which are directly related to the legal process of adoption of a child.

You should create a schedule describing the expenses claimed. If you are mailing your return then you should enclose the schedule with your tax return. If you are e-filing then you should retain the schedule in your records for three years.

What other adjustments might I qualify for?

NOTE: If you're mailing your return and need to send additional documentation for your adjustments, be sure to include this information with your return. If you're e-filing your return, retain the information in your records for three years in case the Oklahoma Tax Commission requests it.
  • Qualified Medical Savings Account/Health Savings Account:

    If you took an HSA Deduction on your federal return, you can't claim this deduction on your Oklahoma return.

    You can subtract the amount of contributions made to and interest earned from your Oklahoma Medical Savings Account (MSA) or Health Savings Account (HSA) from your adjusted gross income. In order to qualify for this subtraction your MSA or HSA program must be approved by either the State Department of Health or the Insurance Commissioner.

    You should receive a statement of the contributions made and interest earned from the trustee of the plan. Your W-2 (W2) doesn't count as a statement for this. You'll need to include your statement and a copy of your federal return when you mail in your Oklahoma return.

  • Agricultural Commodity Processing Facility Exclusion:
    Owners of agricultural commodity processing facilities may exclude 15% of their investment in a new or expanded agricultural commodity processing facility located within Oklahoma. "Agricultural commodity processing facility" is defined as buildings, structures, fixtures, and improvements used or operated primarily for the processing or production of agricultural commodities to marketable products. The investment is deemed made when the property is placed in service. Under no circumstances shall this exclusion lower your taxable income below zero. In the event the exclusion does exceed income, any unused portion may be carried over for a period not to exceed six years.

    A schedule must be enclosed showing the type of investment(s), the date placed in service, and the cost. If the total exclusion available isn't used, a copy of the schedule must be enclosed in the carryover year and show the total exclusion available, the amount previously used and amount available in the carryover year. If the exclusion is through a Partnership or S corporation, the schedule must also include the Partnership's or S corporation's name and ID number and your pro-rata share of the exclusion.

  • Depreciation Adjustment for Swine or Poultry Producers:
    Individuals who are swine or poultry producers may deduct depreciation on an accelerated basis for new construction or expansion costs. The same depreciation method elected for federal income tax purposes will be used, except the assets will be deemed to have a 7 year life. Any depreciation deduction allowable is the amount so computed minus the federal depreciation claimed.

    Enclose a copy of the federal Depreciation Schedule and a computation of the Accelerated Oklahoma Depreciation.
    Note: Once you have fully depreciated an asset on your Oklahoma return, you must add back any depreciation deducted on your federal return.

  • Discharge of Indebtedness for Farmers:
    An individual engaged in production of agriculture may exclude income resulting from the discharge of indebtedness incurred to finance the production of agricultural products.

    Enclose federal Schedule F and Form 1099-C or other substantiating documentation.

  • Oklahoma Police Corps Program Scholarship/Stipend:
    You may deduct any scholarship or stipend received from participation in the Oklahoma Police Corps Program that is included in your federal adjusted gross income.

    Enclose documentation to support the amount claimed and a copy of your federal return.

  • Deduction for Living Organ Donation:
    You may deduct up to $10,000 of unreimbursed expenses if you or your dependent donates one or more human organs while living. "Human organs" mean all or part of a liver, pancreas, kidney, intestine, lung, or bone marrow. The deduction is allowed only one time and may be claimed only for unreimbursed expenses that are incurred by you and related to the organ donation of you or your dependent. The deduction may only be claimed in the taxable year in which the transplant occurs.

    Enclose a detailed schedule of expenses claimed.

  • Safety Pays OSHA Consultation Service Exemption:
    An employer that is eligible for and utilizes the Safety Pays OSHA Consultation Service provided by the Oklahoma Department of Labor shall receive a $1,000 exemption for the tax year the service is utilized.

    If this exemption is through a Partnership or S corporation, include a statement with the Partnership's or S corporation's name, ID number, and your pro-rata share of the exemption.

  • Qualified Refinery Property:
    If a qualified Oklahoma refinery elected to expense the cost of qualified refinery property, enter any of the expense allocated to you.

    Enclose a copy of the written notice received from the refinery indicating the amount of the allocation. The notice should include the company's name and federal identification number.

  • Cost of Complying with Sulfur Regulations:
    If a qualified refinery elected to allocate all or a portion of the cost of complying with sulfur regulations to its owners, enter the portion of the cost allocated to you. Enclose a copy of the written notice received from the refinery indicating the amount of the allocation. The notice should include the company's name and federal identification number.

  • Emergency Medical Personnel Death Benefit Exclusion:
    The $5,000 death benefit paid to the designated beneficiary of an Emergency Medical Technician (EMT) or a registered medical responder whose death is a result of their official duties performed in the line of duty is exempt. Deduct the $5,000 death benefit if the death benefit is included in your federal adjusted gross income.

  • Competitive Livestock Show Award:
    You may deduct any payment of less than $600 received as an award for participation in a competitive livestock show event. You must be able to substantiate this deduction upon request.

  • Discharge of Indebtedness under IRC Section 108(i)(1):
    Income from discharge of indebtedness deferred under IRC Section 108(i)(1), which was added back to compute Oklahoma taxable income in tax year 2010, may be partially deducted. Deduct an amount equal to the portion of the deferred income included in your federal adjusted gross income for tax year 2014. If you're deducting this income as a member of a pass-through entity, include the entity's name and ID number and your pro-rata share of the deferred income.

What out-of-state income qualifies as a subtraction from income?

This is income from real or tangible personal property or business income in another state. This includes partnership gains and gains sustained by S Corporations attributable to other states. It is not non-business interest, installment sale interest, non-business dividends, salary/wages, pensions, gambling, or income from personal services.

Furnish a detailed schedule showing the type, nature and source of the income and copy of Federal return. Documents submitted should reflect to which state(s) the income is attributable. Enclose the other state's return and/or Schedule K-1, if applicable.

If you are mailing your return, be sure to include this information with your return. If you are e-filing your return, retain the information in your records for three years in case the Oklahoma Tax Commission requests it.

What is the National Guard Fund?

You have the opportunity to donate from your tax refund for the benefit of providing financial relief to qualified members of the Oklahoma National Guard and their families. Donations will be placed in the Income Tax Checkoff Revolving Fund for the Support of the Oklahoma National Guard Relief Program. Funds to assist Oklahoma National Guard members and their families with approved hardship expenses will be expended by the Military Department.

What is the Programs for Regional Food Banks in Oklahoma Fund?

This fund benefits the Food Bank of Oklahoma and the Community Food Bank of Eastern Oklahoma (Oklahoma Food Banks). The Oklahoma Food Banks are the largest hunger-relief organizations in the state, distributing food to charitable and faith-based feeding programs throughout all 77 counties in Oklahoma. Your donation will be used to help provide food to the more than 500,000 Oklahomans at risk of hunger on a daily basis.

What qualifies as exempt tribal income?

If the tribal member's principal residence is on "Indian country" as defined in 18 U.S.C. Section 1151, the income earned on Indian country may be deducted. Legally acknowledged Indian country must be within the jurisdiction of the tribe of which he or she is a member. All claimants must provide sufficient information to support that these requirements have been satisfied.

Provide the following information for tax year 2014:

a. A copy of your tribal membership card or certification by your tribe as to your tribal membership during the tax year; and

b. A copy of the trust deed, or other legal document, which describes the real estate upon which you maintained your principal place of residence and which was an Indian allotment, restricted, or held in trust by the United States during the tax year. If your name does not appear on the deed, or other document, provide proof of residence on such property; and

c. A copy of the trust deed, or other legal document, which describes the real estate upon which you were employed or performed work or received income and which was held by the United States of America in trust for a tribal member or an Indian tribe or which was allotted or restricted Indian land during the tax year. Also a copy of employment or payroll records which show you are employed on that Indian country or an explanation of your work on Indian country; and

d. Any other evidence which you believe supports your claim that you meet all of the criteria for exemption from income tax.

If you are mailing your return, be sure to include this information with your return. If you are e-filing your return, retain the information in your records for three years in case the Oklahoma Tax Commission requests it.

What is an Oklahoma 529 College Savings Plan or OklahomaDream 529 Account?

Each individual may exclude contributions, up to $10,000 ($20,000 if married) per taxable year, made to an account established pursuant to the Oklahoma College Savings Plan Act.

If a rollover or non-qualified withdrawal is taken within the same tax year as a contribution is made, the deduction for such contribution must be reduced by the amount of the rollover or non-qualified withdrawal.

Any amount of a contribution that is not deducted in the year for which the contribution is made may be carried forward as a deduction from income for the succeeding five years.

Enclose proof of your contribution including the name of the beneficiary and the account number. If you are mailing your return, be sure to include this information with your return. If you are e-filing your return, retain the information in your records for three years in case the Oklahoma Tax Commission requests it.

What is the Qualifying Disability Deduction?

If you have a physical disability constituting a substantial handicap to employment, you may deduct the expense incurred to modify a motor vehicle, home, or work place necessary to compensate for the disability.

Enclose a schedule detailing the expenses incurred and a description of the physical disability with documentation regarding the Social Security Administration recognition and/or allowance of this expense.

If you are mailing your return, be sure to include the schedule with your return. If you are e-filing your return, retain the schedule in your records for three years in case the Oklahoma Tax Commission requests it.

How is the Oklahoma use tax estimate calculated?

According to the Oklahoma Tax Commission use tax instructions, if you don't know the exact amount of use tax due you can estimate the amount by multiplying your federal adjusted gross income (found on Form 511, Line 1 or Form 511NR, Line 7) by 0.00056, rounded to the nearest whole number.

What out-of-state purchases are subject to use tax?

All items that would be subject to sales tax if purchased in Oklahoma are subject to use tax.

Items that are subject to sales tax include books, compact discs, computer equipment, computer software, electronics, clothing, appliances, furniture and other home furnishings, sporting goods and jewelry.

When an out-of-state retailer does not collect Oklahoma sales tax, the responsibility of paying the tax falls on the purchaser.

What are estimated tax, extension and/or applied payments?

  • Enter any estimated tax payments you made for 2014.
  • Enter any amounts credited from your 2013 return.
  • Enter any amount paid with extension requests.
Do NOT enter any amount of your 2014 Oklahoma Income Tax withheld by your employer(s) as shown on any wage or tax statements.

Does my dependent qualify for the Oklahoma Sales Tax Credit?

Your dependent isn't eligible for the Oklahoma Sales Tax Credit if any of the following conditions apply to them:

  • They weren't a resident of Oklahoma for the entire year.
  • They received TANF (Temporary Assistance for Needy Families) for any month during 2014.
  • They were convicted of a felony and were an inmate in the custody of the Department of Corrections for any portion of the year.
  • They're living in Oklahoma under a visa.
If any of these conditions apply to your dependent, choose No for that dependent under the question Qualifies for Sales Tax Credit?

What is the Oklahoma Honor Flights program?

You have the opportunity to donate any amount of your tax refund to support Oklahoma Honor Flights. Oklahoma Honor Flights is a 501(c)(3) not-for-profit organization that transports Oklahoma World War II veterans to Washington, D.C. to visit the memorial dedicated to honor their service and sacrifice.

What is the Appointed Special Advocates for Abused or Neglected Children Fund?

You may donate to support programs for volunteers to act as Court Appointed Special Advocates for abused or neglected children. Donations will be placed in the Income Tax Checkoff Revolving Fund for Court Appointed Special Advocates. Monies will be expended by the Office of the Attorney General for the purpose of providing grants to the Oklahoma CASA Association.

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