| Oregon Summary of Extender's Bill |
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On December 20, 2006, President Bush signed into law the "Tax Relief and Health Care Act of 2006," also known as the extender's bill. The changes that affect Oregon are the extension of the educator expense deduction, the tuition and fees deduction, and the sales tax deduction.
Congress didn't make these changes until after our 2006 forms and publications were printed. So we are providing some general guidelines on how to report these deductions on Oregon income tax returns.
Educator expense deduction
Oregon allows the qualified educator expenses deduction you claimed on your federal return.
Form 40 — The educator expense deduction will be claimed on federal Form 1040 and be included on the Oregon Form 40 in adjusted gross income on line 8. There will be no adjustment on the Oregon return.
Forms 40N and 40P — Claim the qualified deduction on Forms 40N or 40P, line 28, "Other adjustment to income."
Federal column, line 28F: Enter the amount of the educator expense deduction you claimed on your federal return.
Oregon column, line 28S: For the part of the year you were a nonresident, determine the amount of qualified educator expenses you paid while working in an Oregon elementary or secondary school. Add the qualified educator expenses paid during the part of the year you were an Oregon resident. Enter the lesser of the result or the amount deducted on the federal return, but not more than $250 (no more than $500 if filing jointly and both taxpayers were eligible educators.)
If this is the only item included on this line, identify it with code 005. If you are claiming more than one deduction on line 28, claim the corresponding deductions, and on a separate statement, identify each item with the appropriate codes.
Tuition and fees deduction
Form 40 — If you claimed the federal income adjustment for qualified tuition and fees on your federal return, you will not claim a subtraction on your Oregon return. It will show on your Oregon return in adjusted gross income on line 8.
If you claimed a Hope or Lifetime Learning Credit on your federal return, you can 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. Claim the deduction on line 18, "Other Subtractions," and identify it with code 308.
Form 40N and 40P — Did you claim the tuition and fees deduction on your federal return? If so, you will claim the deduction on Form 40N or 40P, line 28, "Other adjustments to income." If this is the only item included on this line, identify it with code 308. See "Federal column" and "Oregon column" below to figure the amounts for lines 28F and 28S.
Federal column, line 28F. Enter the amount of the federal tuition and fees deduction you claimed on your federal return. The maximum deduction is $4,000.
Oregon column, line 28S. For the part of the year you were a nonresident, calculate your subtraction using the following formula:
Oregon source income
while a nonresident
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×
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Qualified
tuition and
fees paid while
a nonresident
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=
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Nonresident
deduction
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Total income
while a nonresident
|
Add to the nonresident deduction the amount of qualified tuition and fees you paid while an Oregon resident. Enter the lesser of the results, the amount you deducted on your federal return, or $4,000 — the maximum deduction allowed.
If you are claiming both the educator expense and tuition and fees deductions on your federal return, claim the corresponding deductions on line 28, "Other adjustment to income" and identify each item on a separate statement with the appropriate codes.
Did you claim a Hope or Lifetime Learning Credit on your federal return? If so, you weren't allowed to deduct tuition and fees because you claimed the federal credit. Because Oregon doesn't have credits similar to the Hope or Lifetime Learning Credits, you can take the federal tuition and fees deduction on your Oregon return as a subtraction on line 37—identify it using code 308.
Federal column, line 37F: Enter the amount of the federal tuition and fees deduction you would have claimed on your federal return had you not claimed a Hope or Lifetime Learning Credit.
Oregon column, line 37S: Enter the amount using the formula for the Oregon column above.
Enter the lesser of the results, the amount you could have deducted on your federal return, or $4,000 — the maximum deduction allowed.
Sales tax deduction
For tax year 2006, you may not claim state or local sales tax on your Oregon return. You must make the same election on your Oregon return as you did on your federal return.
Individuals who reduce their total federal itemized deductions because of income limits will need to complete a worksheet to determine the amount to subtract from their Oregon itemized deductions. The worksheet is available in the Itemized Deductions Limit publication.
If you itemize deductions and claim the sales tax deduction, you must reduce your itemized deductions as follows:
Form 40 - Report on line 24 the amount of state sales tax claimed as an itemized deduction. Subtract line 24 from line 23 to arrive at the net Oregon itemized deduction on line 25.
Forms 40N and 40P - Report on line 42 the amount of state sales tax claimed as an itemized deduction. Subtract line 42 from line 41 to arrive at the net Oregon itemized deduction on line 43.
Revised December 26, 2006
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